SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
FORM 8-K
Current Report Pursuant To Section 13 or 15(d) Of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 10, 1998
ADVANTICA RESTAURANT GROUP, INC.
(Exact Name of registrant as specified in its charter)
DELAWARE 0-18051 13-3487402
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
203 East Main Street, Spartanburg, SC 29319-9966
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 597-8000
Former name or former address, if changed since last report:
------------------------------------------------
<PAGE>
Item 2 Acquisition or Disposition of Assets
On June 10, 1998, the Registrant completed the sale of all the capital stock of
Quincy's Restaurants, Inc. ("Quincy's"), the wholly-owned subsidiary which
operates the Registrant's Quincy's Family Steakhouse Division, to Buckley
Acquisition Corporation ("BAC") for $84.7 million (subject to adjustment),
which includes the assumption by BAC of $4.2 million of debt.
For certain pro forma financial information concerning the transaction, see Item
7, below. Such pro forma information for the year ended December 31, 1997 and
the one week ended January 7, 1998 also gives effect to the consummation of the
Registrant's Amended Joint Plan of Reorganization dated as of November 7, 1997
(the "Plan of Reorganization") (as further described therein) which was
confirmed on November 12, 1997 and became effective on January 7, 1998 and for
the year ended December 31, 1997 gives effect to the disposition of Flagstar
Enterprises, Inc. ("FEI") which was consummated on April 1, 1998.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information.
The following pro forma financial information is included herein:
Page
Number
in Filing
---------
(i) Pro Forma Condensed Consolidated Balance Sheets 5
(Unaudited) as of April 1, 1998 and
(ii) Pro Forma Condensed Statements of Consolidated 7
Operations (Unaudited) for the Year Ended
December 31, 1997, the One Week Ended January 7,
1998 and the Twelve Weeks Ended April 1, 1998.
(c) Exhibits
Listed below are all Exhibits filed as a part of this current report.
Exhibit Number Description
- -------------- -----------
99.1 Stock Purchase Agreement By and Among Buckley
Acquisition Corporation, Spartan Holdings,
Inc., and Advantica Restaurant Group, Inc.
dated as of May 13, 1998.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Advantica Restaurant Group, Inc.
By: /s/ Rhonda J. Parish
-----------------------------------------
Name: Rhonda J. Parish
Title: Executive Vice President, General Counsel
and Secretary
Date: June 24, 1998
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated balance sheets and unaudited pro
forma condensed statements of consolidated operations presented on the following
pages are based upon the historical results of operations of the Registrant for
the year ended December 31, 1997 and the one week ended January 7, 1998
("Predecessor Company") and the historical financial position and results of
operations of the Registrant as of and for the twelve weeks ended April 1, 1998
("Successor Company"). The pro forma adjustments made to the historical results
of operations (based on the assumptions set forth below) give effect to the
disposition of Quincy's, the consummation of the Plan of Reorganization and the
disposition of FEI as if such dispositions and the entire series of Plan of
Reorganization transactions had occurred on January 1, 1997. The series of
transactions associated with the Plan of Reorganization include (i) the merger
of Flagstar Corporation ("Flagstar") and Flagstar Companies, Inc. ("FCI") (the
Registrant's predecessor) into a single corporate entity; (ii) the issuance of
38,200,000 shares of $.01 par value common stock of the Registrant (the "Common
Stock") to holders of Flagstar's 11.25% Senior Subordinated Debentures due 2004
and 11 3/8% Senior Subordinated Debentures due 2003 (collectively, the "Senior
Subordinated Debentures"); (iii) the issuance of 1,800,000 shares of Common
Stock to holders of Flagstar's 10% Convertible Junior Subordinated Debentures
due 2014 (the "10% Convertible Debentures"); (iv) the issuance of new warrants
expiring January 7, 2005 that entitle the holders thereof to purchase in the
aggregate 4 million shares of Common Stock at an exercise price of $14.60 per
share (the "Warrants") to holders of the 10% Convertible Debentures; (v) the
issuance of the Registrant's 11 1/4% Senior Notes due 2008 (the "New Senior
Notes") to holders of Flagstar's 10 7/8% Senior Notes due 2002 and 10 3/4%
Senior Notes due 2001 (collectively, the "Old Senior Notes"); and (vi) the
cancellation of FCI's $2.25 Series A Cumulative Convertible Exchangeable
Preferred Stock (the "Old Preferred Stock") and FCI's $.50 par value common
stock (the "Old Common Stock"). In addition, since the Plan of Reorganization
was effectuated under Chapter 11 of the Bankruptcy Code, the provisions of
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"), which require the application of fresh
start reporting, have been reflected in the pro forma condensed statements of
consolidated operations as if the reorganization had occurred on January 1,
1997. The disposition of FEI included the (i) sale to CKE Restaurants, Inc.
("CKE") of the stock of FEI, the wholly-owned subsidiary which operated the
Registrant's Hardee's restaurants under licenses from Hardee's Food Systems,
Inc. ("HFS"), a wholly-owned subsidiary of CKE, for $427 million, which included
the assumption by CKE of $46 million of debt; and (ii) the use of $173.1 million
of the proceeds (together with $28.6 million already on deposit with respect to
certain Mortgage Financings as defined below) to in-substance defease the 10.25%
Guaranteed Secured Bonds due 2000 (the "Mortgage Financings") of Spardee's
Realty, Inc., a wholly-owned subsidiary of FEI, and Quincy's Realty, Inc., a
wholly-owned subsidiary of Quincy's. Such collateral was replaced through the
purchase of a portfolio of United States Government and AAA rated investment
securities which were deposited with the collateral agent with respect to such
Mortgage Financings to satisfy principal and interest payments under such
Mortgage Financings through the stated maturity date in the year 2000. The
unaudited pro forma condensed consolidated balance sheets as of April 1, 1998
presented below are based upon the historical balance sheet as of April 1, 1998
and include pro forma adjustments as if the disposition of Quincy's had been
completed on that date. The pro forma condensed statements of consolidated
operations and pro forma condensed consolidated balance sheets are unaudited and
were derived by adjusting the historical financial statements of the Registrant
for certain transactions as described in the respective notes thereto. THESE PRO
FORMA FINANCIAL STATEMENTS ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND
SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE FINANCIAL CONDITIONS OR RESULTS
OF OPERATIONS OF THE COMPANY HAD THE TRANSACTIONS DESCRIBED THEREIN BEEN
CONSUMMATED ON THE RESPECTIVE DATES INDICATED AND ARE NOT INTENDED TO BE
PREDICTIVE OF THE FINANCIAL CONDITION OR RESULTS OF OPERATIONS OF THE COMPANY AT
ANY FUTURE DATE OR FOR ANY FUTURE PERIOD.
4
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Successor Company
April 1, 1998
------------------------------------------
Adjustments
for
Historical Disposition of Quincy's(1)
(In thousands) --------------- --------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ......... $ 228,262 $ 80,337
Net assets held for sale .......... 33,766 (33,766)
Other ............................. 52,780 (2,499)
Restricted investments
securing in-substance
defeased debt ................... 17,099
---------- ---------
331,907 44,072
---------- ---------
Property -- net .................... 769,422 (24,278)
----------
Other Assets:
Reorganization value in
excess of amounts
allocable to identifiable
assets .......................... 723,379 (37,285)
Other intangible assets, net ...... 232,487
Other ............................. 56,499 (24)
Restricted investments
securing in-substance
defeased debt ................... 184,614
---------- ---------
1,196,979 (37,309)
---------- ---------
$2,298,308 $(17,515)
========== =========
Liabilities
Current Liabilities
Current maturities of notes
and debentures .................. $ 23,314
Current maturities of capital
lease obligations ............... 19,347 (198)
Current maturities of
in-substance defeased debt....... 12,548
Other current liabilities ......... 379,659 (11,417)
---------- ---------
434,868 (11,615)
---------- ---------
Long-Term Liabilities:
Notes and debentures, less
current maturities .............. 982,217
Capital lease obligations, less
current maturities .............. 83,453 (4,002)
In-substance defeased debt,
less current maturities ......... 186,389
Other non-current liabilities ..... 237,134 (1,898)
---------- ---------
1,489,193 (5,900)
---------- ---------
Total liabilities ................. 1,924,061 (17,515)
---------- ---------
Shareholders' Equity:
Capital stock ..................... 400
Paid-In capital ................... 416,927
Deficit ........................... (43,080)
---------- ---------
374,247
---------- ---------
$2,298,308 $(17,515)
========== =========
<CAPTION>
Successor Company
April 1, 1998
------------------------
After
Disposition
(In thousands) -----------------------
<S> <C>
Assets
Current Assets:
Cash and cash equivalents ......... $ 308,599
Net assets held for sale .......... --
Other ............................. 50,281
Restricted investments
securing in-substance
defeased debt ................... 17,099
----------
375,979
----------
Property -- net .................... 745,144
----------
Other Assets:
Reorganization value in
excess of amounts
allocable to identifiable
assets .......................... 686,094
Other intangible assets, net ...... 232,487
Other ............................. 56,475
Restricted investments
securing in-substance
defeased debt ................... 184,614
----------
1,159,670
----------
$2,280,793
==========
Liabilities
Current Liabilities
Current maturities of notes
and debentures .................. 23,314
Current maturities of capital
lease obligations ............... 19,149
Current maturities of
in-substance defeased debt....... 12,548
Other current liabilities ......... 368,242
----------
423,253
----------
Long-Term Liabilities:
Notes and debentures, less
current maturities .............. 982,217
Capital lease obligations, less
current maturities .............. 79,451
In-substance defeased debt,
less current maturities ......... 186,389
Other non-current liabilities ..... 235,236
----------
1,483,293
----------
Total liabilities ................. 1,906,546
----------
Shareholders' Equity:
Capital stock ..................... 400
Paid-In capital ................... 416,927
Deficit ........................... (43,080)
----------
374,247
----------
$2,280,793
==========
</TABLE>
See notes to pro forma condensed consolidated balance sheets.
5
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
Adjustments for Disposition of Quincy's
As further described elsewhere in this Form 8-K, on June 10, 1998 the
Registrant consummated the sale of stock of Quincy's, a wholly-owned subsidiary
which operates the Registrant's Quincy's Family Steakhouse Division. The
Registrant received $80.5 million in cash (subject to adjustment as outlined in
such definitive stock purchase agreement) in exchange for all of the outstanding
stock of Quincy's. In addition, the purchaser assumed $4.2 million of capital
leases.
(1) To reflect the disposition of Quincy's, including the receipt of cash
proceeds of $80.5 million and the incurrence of $8.0 million of estimated
transaction costs.
6
<PAGE>
PRO FORMA CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Predecessor Company
Year ended December 31, 1997
Pro Forma
----------------------------------
Adjustments
for
($ in thousands, except per share amounts) Historical Reorganization
- ------------------------------------------------ -------------- -------------------
<S> <C> <C>
Operating revenue ............................. $2,609,456
Operating expenses ............................ 2,479,028
---------- --
Operating income .............................. 130,428
----------
Other charges:
Interest and debt expense, net ............... 226,388 $ (48,984)(a)
Other, net ................................... 5,648
----------
232,036 (48,984)
---------- ----------
Income (loss) before reorganization
expenses and taxes ........................... (101,608) 48,984
Reorganization expenses ....................... 31,073 (31,073)(b)
---------- ----------
Income (loss) before income taxes ............. (132,681) 80,057
Provision for (benefit from) income taxes ..... 1,769
---------- ----------
Net (loss) income ............................. $ (134,450) $ 80,057
========== ==========
Basic and diluted loss per share applicable
to common shareholders ....................... $ (3.50)
==========
Average outstanding and equivalent
common shares ................................ 42,434
==========
<CAPTION>
Predecessor Company
Year ended December 31, 1997
Pro Forma
--------------------------------------------------------------------------------------------
After After
Adjustments After Adjustments Reorganization, Adjustments Reorganization,
for Reorganization for Fresh Start for Fresh Start
($ in thousands, Fresh Start and Fresh Start Disposition Reporting and Disposition of Reporting and
except per share amounts) Reporting Reporting of FEI (f) Disposition of FEI Quincy's (g) Dispositions
- -------------------------------------- ----------------------------- ------------ ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue ................... $2,609,456 $ (546,268) $2,063,188 $(233,603) $1,829,585
Operating expenses .................. $ 161,587(c) 2,640,615 (516,901) 2,123,714 (261,339) 1,862,375
---------- ---------- ---------- ---------- ---------- ----------
Operating income .................... (161,587) (31,159) (29,367) (60,526) 27,736 (32,790)
---------- ---------- ---------- ---------- ---------- ----------
Other charges:
Interest and debt expense, net ..... (12,430)(d) 164,974 (7,129) 157,845 (614) 157,231
Other, net ......................... 5,648 (2,023) 3,625 594 4,219
---------- ---------- ---------- ---------- ----------
(12,430) 170,622 (9,152) 161,470 (20) 161,450
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before reorganization
expenses and taxes ................. (149,157) (201,781) (20,215) (221,996) 27,756 (194,240)
Reorganization expenses ............. --
----------
Income (loss) before income taxes ... (149,157) (201,781) (20,215) (221,996) 27,756 (194,240)
Provision for (benefit from) income
taxes ............................. 14 (e) 1,783 (40) 1,743 80 1,823
---------- ---------- ---------- ---------- ---------- ----------
Net (loss) income ................... $ (149,171) $ (203,564) $ (20,175) $ (223,739) $ 27,676 $ (196,063)
========== ========== ========== ========== ========== ==========
Basic and diluted loss per share
applicable to common shareholders .. $ (5.09) $ (5.59) $ (4.90)
========== ========== ==========
Average outstanding and equivalent
common shares ...................... 40,000 40,000 40,000
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company
Week Ended January 7, 1998
-------------------------------------------------------------------------------
Pro Forma
------------------------------------------------------------
After
Adjustments Adjustments Reorganization
for for Fresh-Start and Fresh Start
Historical Reorganization Reporting Reporting
----------------- -------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Operating revenue $37,132 $ 37,132
Operating expenses 28,558 3,099 (c) 31,657
----------------- -------------------- ------------------ ----------------
Operating income 8,574 (3,099) 5,475
Other charges:
Interest and debt expense, net 2,745 (939) (a) (238) (d) 1,567
Other, net (74) (74)
----------------- -------------------- ------------------ ----------------
2,671 (939) (238) 1,493
----------------- -------------------- ------------------ ----------------
Income (loss) before reorganization
expenses and taxes 5,903 939 (2,861) 3,982
Reorganization expenses (656,083) 656,083 (b)
----------------- -------------------- ------------------ ----------------
Income (loss) before income taxes 661,986 939 (658,944) 3,982
Provision (benefit) for income taxes (17,547) 17,574 (e) 27
----------------- -------------------- ------------------ ----------------
(Loss) income from continuing operations 679,533 939 (676,518) 3,955
================= ==================== ================== ================
Per share amounts applicable to common shareholders:
Basic income (loss) per share from
continuing operations $16.01 $0.10
================= ================
Average outstanding and equivalent comon shares 42,434 40,000
================= ================
Diluted income (loss) per share from
continuing operations $12.33 $0.10
================= ================
Average outstanding and equivalent comon shares 55,132 40,000
================= ================
<CAPTION>
Predecessor Company
Week Ended January 7, 1998
----------------------------------------------------------------------------
Pro Forma
----------------------------------------------------------------------------
After
Reorganization,
Adjustments Fresh Start
for Disposition Reporting and
of Quincy's (g) Disposition
---------------- ----------------
<S> <C> <C>
Operating revenue (3,544) 33,588
Operating expenses (3,830) 27,827
---------------- ----------------
Operating income 286 5,761
Other charges:
Interest and debt expense, net (27) 1,540
Other, net (49) (123)
---------------- ----------------
(76) 1,417
---------------- ----------------
Income (loss) before reorganization
expenses and taxes 362 4,344
Reorganization expenses
---------------- ----------------
Income (loss) before income taxes 362 4,344
Provision (benefit) for income taxes 27
---------------- ----------------
(Loss) income from continuing operations 362 4,317
Per share amounts applicable to common shareholders:
Basic income (loss) per share from continuing operations $0.11
Average outstanding and equivalent comon shares 40,000
================
Diluted income (loss) per share from continuing operations $0.11
Average outstanding and equivalent comon shares 40,000
================
</TABLE>
<TABLE>
<CAPTION>
Successor Company
Twelve Weeks Ended April 1, 1998
-----------------------------------------
Pro Forma
-----------------------------
Adjustments
for Disposition After
Historical of Quincy's (g) Disposition
---------- ---------------- -----------
<S> <C> <C> <C>
Operating revenue $436,709 ($46,169) $390,540
Operating expenses 450,258 (47,089) 403,169
---------- ---------------- -----------
Operating income (13,549) 920 (12,629)
Other charges:
Interest and debt expense, net 28,269 (205) 28,064
Other, net 762 (292) 470
---------- ---------------- -----------
29,031 (497) 28,534
---------- ---------------- -----------
Loss before income taxes (42,580) 1,417 (41,163)
Provision (benefit) for income taxes 500 (16) 484
---------- ---------------- -----------
Net (loss) income ($43,080) $ 1,433 (41,647)
========== ================ ===========
Basic and diluted loss per share applicable to
common shareholders ($1.08) ($1.04)
========== ===========
Average outstanding and equivalent shares 40,000 40,000
========== ===========
</TABLE>
7
<PAGE>
NOTES TO PRO FORMA CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
Adjustments for Reorganization
(a) The following table details the net adjustment to interest expense related
to the consummation of the Plan of Reorganization:
<TABLE>
<CAPTION>
One Week
Year Ended Ended
($ in thousands) December 31, 1997 January 7, 1998
- -------------------------------------------------------------------------- ------------------ ---------------
<S> <C> <C>
Elimination of amortization of deferred financing cost on debt
securities retired ............................................. $ (1,903) (36)
Elimination of interest on debt securities retired .............. (55,476) (1,064)
Amortization of deferred financing cost of the new credit
facility ..................................................... 1,400 27
Increase in interest expense due to exchange of Old Senior Notes 6,995 134
--------- ---------------
Net adjustment to interest expense .............................. $ (48,984) $ (939)
========= ===============
</TABLE>
- ---------
(b) To remove the impact of reorganization expenses which would not be
reflected in the post-reorganization statement of operations.
Adjustments for Fresh Start Reporting
(c) To reflect, for the year ended December 31, 1997 and the one week ended
January 7, 1998; the removal of the amortization of goodwill of $5.1 million
and $0.1 million, respectively; the estimated increase in amortization of
$11.4 million and $0.1 million, respectively as a result of the revaluation of
other intangible assets to fair value; the estimated increase in depreciation
expense of $9.4 million and $0.1 million, respectively as a result of the
revaluation of property to estimated fair value; and the addition of the
amortization of reorganization value in excess of amounts allocable to
identifiable assets, assuming a 5-year life, of $145.9 million and
$2.8 million, respectively.
(d) To record, for the year ended December 31, 1997 and the one week ended
January 7, 1998, the estimated impact on interest expense of the amortization
of the premium on long-term debt of $12.4 million and $0.2 million,
respectively.
(e) To record the estimated income tax effects of fresh start reporting.
Adjustments for Disposition of FEI
(f) To remove the results of operations of FEI for the year ended December 31,
1997.
Adjustments for Disposition of Quincy's
(g) To remove the results of operations of Quincy's and reflect the decrease in
amortization of reorganization value due to the disposition of Quincy's for
the year ended December 31, 1997, the one week ended January 7, 1998 and the
twelve weeks ended April 1, 1998.
8
Exhibit 99.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
BUCKLEY ACQUISITION CORPORATION,
SPARTAN HOLDINGS, INC.
AND
ADVANTICA RESTAURANT GROUP, INC.
DATED AS OF MAY 13, 1998
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of May 13, 1998, by and among BUCKLEY ACQUISITION CORPORATION , a
Delaware corporation ("BAC"); SPARTAN HOLDINGS, INC., a New York corporation
("Spartan"); and ADVANTICA RESTAURANT GROUP, INC., a Delaware corporation
("Advantica," and collectively with Spartan, the "Sellers").
PREAMBLE
Spartan is the record and beneficial owner of all of the issued and
outstanding shares of capital stock (the "Shares") of Quincy's Restaurants,
Inc., an Alabama corporation ("Quincy's"). Advantica owns all of the issued and
outstanding shares of capital stock of Spartan. Spartan desires to sell the
Shares to BAC, and BAC desires to purchase the Shares from Spartan, upon the
terms and subject to the conditions set forth in this Agreement. The
consummation of the transactions described in this Agreement is subject to the
expiration of the required waiting period under the HSR Act, if applicable, and
the satisfaction of certain other conditions described in this Agreement.
Certain capitalized terms used in this Agreement are defined in Section
9.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 PURCHASE AND SALE. Upon the terms and subject to the conditions of
this Agreement, Spartan shall sell to BAC, and BAC shall purchase from Spartan,
the Shares at the Closing (the "Stock Purchase"). The aggregate purchase price
for the Shares (the "Purchase Price") is Eighty One Million Four Hundred Ninety
Five Thousand Seven Hundred Twenty Four Dollars ($81,495,724) in cash (the "Cash
Payment"). The Purchase Price shall be subject to adjustment as provided in
Section 1.4 and 1.7 and shall be paid as provided in Sections 1.5 and 1.7.
1.2 EXCLUDED ASSETS. On or prior to the Closing Date, the Quincy's
Entities shall assign, convey and deliver to Spartan (or such other Person as
Spartan may designate to BAC prior to the Closing Date), and Spartan shall
acquire and accept (or cause such Person to acquire and accept) from the
Quincy's Entities, all right, title and interest of the Quincy's Entities in and
to the following assets, properties and rights (collectively, the "Excluded
Assets"):
-1-
<PAGE>
(A) The Real Property identified in Section 1.2(a) of the Disclosure
Schedule (collectively, the "Excluded Real Property");
(B) All of the assets of the Quincy's Entities as of the Closing Date
of the categories shown on SCHEDULE A hereto as remaining with the Sellers;
(C) The Real Property, if any, excluded from the transaction
contemplated hereby pursuant to Section 1.4(a) or Section 1.8(b);
(D) The Real Property relating to any Restaurant which is converted as
contemplated by Section 1.4(b) during the period beginning on the date hereof
and ending on the Closing Date; and
(E) The equipment, improvements, inventory and cash located on or used
or to be used by the operations located at any of the Excluded Real Property,
any Real Property excluded from the transaction contemplated hereby pursuant to
subparagraph (c) or (d) of this Section 1.2 or a Restaurant located at the North
Charleston #1 location.
1.3 EXCLUDED LIABILITIES. Effective as of the close of business on the
Closing Date, Spartan (or such other Person as Spartan may designate to BAC
prior to the Closing) shall assume full responsibility for the performance and
satisfaction of the following obligations and liabilities of the Quincy's
Entities (collectively, the "Excluded Liabilities"):
(A) Any liability identified in Section 1.3(a) of the Disclosure
Schedule;
(B) Except as provided in Section 5.13, all Quincy Benefit Plans (as
defined in Section 2.15) and any other employee benefit plan maintained by
Quincy's prior to the Closing Date or to which Quincy's has made any
contribution prior to the Closing Date or to which Quincy's could be subject to
any liability for the benefit of any of the employees of the Business arising
out of or payable on account of service prior to the Closing Date (including,
without limitation, liability for post retirement benefits and accrued pension
liabilities), provided however that the Quincy's Entities shall remain and be
liable to make appropriate payments to the Advantica 401(k) Plan with respect to
employee deferrals, employer matching contributions thereon and loan repayments
by the Hired Employees for periods ending on the Closing Date under the
Advantica 401(k) Plan, which liabilities (other than employee deferrals and loan
repayments) shall be accrued on Schedule A and included in the calculation of
Closing Date Value;
(C) Any liability or lien applicable to a Quincy Pension Plan (as
defined in Section 2.15) (which term includes a pension plan of an ERISA
Affiliate) or any liability or lien applicable to any "multiemployer plan" (as
defined in ERISA Sections 3(37)(A) or 4001(a)(3)) in respect of any
multiemployer plan maintained or contributed to by or on behalf of Quincy's or
by any Person that is treated as a single employer with Quincy's under Section
414(b), (c), (m) or (o)
-2-
<PAGE>
of the Code (the Person so aggregated with Quincy's being referred to in this
Agreement as an "ERISA Affiliate");
(D) Any liability or obligation arising or accruing as a result of the
retention bonus program for field employees referenced in Section 1.3(d) of the
Disclosure Schedule;
(E) All of the liabilities of the Quincy's Entities as of the Closing
Date of the categories listed on SCHEDULE A as remaining with the Sellers;
(F) Any liability or obligation under sale-leaseback agreements entered
into by or on behalf of Quincy's after July 30, 1997;
(G) Any liability with respect to any claims, causes of action, charges
or prelitigation matters made, pending or asserted prior to the Closing Date and
listed on Section 2.17 of the Disclosure Memorandum, but excluding workers
compensation liabilities; and
(H) Any liability with respect to any claims or causes of action,
regardless of when made or asserted, which arises or accrues out of or in
connection with the operations of the Business on or prior to the Closing Date
covered (without consideration of any applicable deductible) by automobile,
property, boiler and machinery or general liability insurance currently
maintained in respect of the Business, but excluding workers compensation
liabilities.
1.4 CLOSING DATE ADJUSTMENTS OF PURCHASE PRICE.
(A) CERTAIN ENCUMBRANCES. Subject to Section 1.4(b) below, if Sellers
are unable to cause a Quincy's Entity to own as of the Closing Date good and
marketable title to any Real Property, free and clear of all Liens other than
Permitted Encumbrances, then at the Closing each such Real Property shall, at
the election of BAC conveyed to Spartan in writing, be deemed to be an Excluded
Asset and, subject to Section 8.1(f), the Purchase Price shall be reduced in an
amount equal to the aggregate Value of all such Real Property so excluded.
(B) SOLD REAL PROPERTY AND CONVERTED RESTAURANTS. If any Real Property
is sold during the period beginning on the date hereof and ending on the Closing
Date, or if any Restaurant is converted during the period beginning on the date
hereof and ending on the Closing Date, then the Purchase Price shall be reduced
as follows:
(i) if such sale or conversion occurs during the period
beginning on the date hereof and ending on the Closing Date pursuant to
a binding contractual commitment entered into on or before the date
hereof (a "Pre-Committed Sale"), then the Purchase Price shall be
reduced by (a) the gross sales price for such Real Property, minus (Y)
the sum of the applicable commission for, and reasonable expenses
relating to such sale, which sum shall not exceed ten percent (10%) of
such gross sales price in the case of each parcel of Real Property so
sold, and (b) the Value allocated to the parcel of Real Property on
which such Restaurant is located, in the case of each Restaurant so
converted; and
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(ii) if such sale or conversion occurs during the period
beginning on the date hereof and ending on the Closing Date, then,
unless such sale or conversion is a Pre-Committed Sale, the Purchase
Price shall be reduced by (a) the gross sales price for such Real
Property minus the sum of the applicable commission for and reasonable
expenses relating to such sale, which sum shall not exceed ten percent
(10%) of such gross sales price, in the case of each parcel of Real
Property so sold, and (b) the Value allocated to the parcel of Real
Property on which such Restaurant is located, in the case of each
Restaurant so converted.
1.5 TIME AND PLACE OF CLOSING.
(a) Subject to the terms and conditions hereof, the closing of the
transactions contemplated hereby will take place at 11:59 P.M. on May 27, 1998,
or at such other time as the Parties, acting through their authorized officers,
may mutually agree in a separate writing (the "Closing"). The Closing shall be
held at the offices of Alston & Bird LLP, One Atlantic Center, 1201 West
Peachtree Street, Atlanta, Georgia 30309 or such other location as may be
mutually agreed upon by the Parties.
(b) At the Closing (except in the case of (b)(i), which will occur by
10:00 a.m. on the next Business Day immediately following the Closing Date):
(i) BAC shall deliver to Spartan the Cash Payment in immediately
available funds by wire transfer to one or more accounts specified by Spartan;
(ii) Spartan shall cause the Quincy's Entities to deliver to
Spartan or such other Person as Spartan may designate in accordance with Section
1.2 such bills of sale, titles, deeds, assignments, endorsements and other good
and sufficient instruments and documents of conveyance and transfer, in form
reasonably satisfactory to BAC and Spartan and their respective counsel, as
shall be necessary and effective to transfer and assign to Spartan or such other
Person all of Quincy's right, title and interests of the Quincy's Entities in
and to the Excluded Assets; and
(iii) Spartan shall deliver to BAC:
(1) certificates representing all the Shares duly
endorsed and in form for transfer to BAC (or such other Person
as BAC may designate to Spartan not less than five business
days prior to the Closing), free and clear of any Liens;
(2) an instrument or instruments of the assignment
and assumption of the Excluded Liabilities, duly executed by
the appropriate Quincy's Entity and by Spartan or such other
Person as Spartan may designate in accordance with Section 1.3
and in form reasonably satisfactory to BAC and Spartan and
their respective counsel; and
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(3) the opinion, certificates and other documents set
forth in Section 6.2.
1.6 CLOSING DATE BALANCE SHEET.
(a) As promptly as practicable, but not later than sixty (60) days
after the Closing Date, Advantica will cause to be prepared and delivered to BAC
a consolidated balance sheet for the Quincy's Entities as of the Closing Date
(the "Closing Date Balance Sheet"), together with a certificate based on such
Closing Date Balance Sheet setting forth Advantica's calculation of Closing Date
Value, which shall be prepared in a manner consistent with the accounting
policies and practices used in the preparation of SCHEDULE A. The Closing Date
Balance Sheet shall (i) fairly present the consolidated financial position of
the Quincy's Entities as of the close of business on the Closing Date in
accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of SCHEDULE A, exclusive of
adjustments related to "fresh-start" accounting and any other adjustments
arising out of the Advantica Reorganization and adjustments eliminating all
intercompany accounts such as indebtedness, accounts receivable and accounts
payable, (ii) include line items substantially consistent with those in SCHEDULE
A, and (iii) subject to the provisions of clause (i) above, be prepared in
accordance with accounting policies and practices consistent with those used in
the preparation of SCHEDULE A.
(b) The Closing Date Balance Sheet and Advantica's calculation of
Closing Date Value delivered pursuant to Section 1.6(a) shall be deemed final
upon the earliest of (i) the date on which BAC agrees that such documents are
final, (ii) the 45th day after delivery of such documents pursuant to Section
1.6(a), if BAC has not delivered a notice to Advantica expressing disagreement
with such calculations and setting forth its calculation of such amount(s), and
(iii) the date on which all disputes relating to such statements and
calculations between the parties are resolved in accordance with Section 1.6(c).
If BAC disagrees with Advantica's calculation of Closing Date Value, BAC shall
have the right to deliver to Advantica within 45 days of BAC's receipt of such
calculation a notice of disagreement which shall specify those items or amounts
as to which it disagrees and set forth BAC's calculation of such amounts, and
BAC shall be deemed to have agreed with all other items and amounts contained in
the Closing Date Balance Sheet and Advantica's calculation of Closing Date Value
(except to the extent resolution of the items or amounts to which BAC expresses
disagreement requires conforming changes to other items and amounts contained in
the Closing Date Balance Sheet or the calculation of the Closing Date Value).
(c) If BAC shall deliver a notice of disagreement pursuant to Section
1.6(b), BAC and Advantica shall, during the thirty (30) days following such
delivery, use their reasonable efforts to reach agreement on the disputed items
or amounts (the "Disputed Amounts"). To the extent any of the Disputed Amounts
involve any Reserves, Advantica shall have the option, exercisable by written
notice to BAC during such thirty (30) day period, to exclude one or more of the
Reserves from the Closing Date Value. Any notice of election delivered by
Advantica to BAC to exclude one or more of the Reserves from the Closing Date
Value shall identify which Reserve or Reserves shall be so excluded and shall
automatically and without further action of
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the parties hereto result in the liabilities for which the Reserve was
established being treated for all purposes of this Agreement as Excluded
Liabilities. In addition, Advantica shall be obligated to reimburse BAC or the
Quincy's Entities, as the case may be, for any out-of-pocket costs incurred by
BAC or the Quincy's Entities, in respect of such liabilities for which the
Reserve was established during the period commencing immediately after Closing
and ending on the date BAC is given written notice by Advantica of the exercise
of the foregoing option. Such reimbursement shall be made within three (3)
Business Days of Advantica's receipt of evidence that BAC or the Quincy's
Entitles, as the case may be, has paid such incurred costs. In the event and to
the extent Advantica exercises this option, the Disputed Amounts shall no longer
include those disputed amounts relating to the Reserves as to which Advantica
has exercised its option and the Closing Date Value shall not reflect any
Reserves so excluded. If, during such period, BAC and Advantica are unable to
reach such agreement, they shall promptly thereafter cause KPMG Peat Marwick (or
if said firm shall have a conflict due to a relationship with BAC, Spartan or
Advantica or shall be unwilling to act thereunder, such other independent
accountants of nationally recognized standing reasonably satisfactory to BAC and
Advantica who shall not have any material relationship with BAC, Spartan or
Advantica), promptly to review this Agreement, the documents delivered pursuant
to Section 1.6(a) and any other documents necessary to calculate the Disputed
Amounts (including all work papers of the parties used in calculating the
Disputed Amounts). In making such calculation, such independent accountants
shall act as experts and not arbitrators and shall consider only the Disputed
Amounts, solely in accordance with the terms of this Agreement. Such independent
accountants shall deliver to Sellers and BAC, as promptly as practicable, a
report setting forth such calculation. Such report shall be final and binding
upon Sellers and BAC. The cost of such review and report shall be borne (i) by
BAC if the difference (expressed as a positive number) between Final Closing
Date Value and BAC's calculation of Closing Date Value delivered pursuant to
Section 1.6(a) is greater than the difference (expressed as a positive number)
between Final Closing Date Value and Advantica's calculation of Closing Date
Value delivered pursuant to Section 1.6(b), (ii) by Sellers if the difference
(expressed as a positive number) between Final Closing Date Value and
Advantica's calculation of Closing Date Value delivered pursuant to Section
1.6(b) is greater than the difference (expressed as a positive number) between
Final Closing Date Value and BAC's calculation of Closing Date Value delivered
pursuant to Section 1.6(a), and (iii) otherwise equally by Sellers as one party
and BAC as the other party.
(d) Sellers and BAC agree that they will, and will cause their
respective independent accountants and the Quincy's Entities to, cooperate and
assist in the preparation of the Closing Date Balance Sheet and the calculation
of Closing Date Value and in the conduct of the audits and reviews referred to
in this Section 1.6, including, without limitation, making available, to the
extent necessary, relevant books, records, working papers, analyses and
schedules, and permitting representatives of the parties to consult with the
respective employees, auditors, actuaries, attorneys and agents of Quincy's and
its Subsidiaries.
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1.7 WORKING CAPITAL ADJUSTMENT OF PURCHASE PRICE.
(A) If Final Closing Date Value is less than $(12,620,000), Sellers
shall pay to BAC, as an adjustment to the Purchase Price, in the manner and with
interest as provided in Section 1.7(b), the amount of such difference. If Final
Closing Date Value exceeds $(12,620,000), BAC shall pay to Spartan, in the
manner and with interest as provided in Section 1.7(b), the amount of such
excess.
(B) Any payment pursuant to Section 1.7(a) shall be made within five
days after the Final Closing Date Value has been determined by delivery by BAC
or Spartan, as the case may be, by wire transfer of immediately available funds
to the appropriate party or parties. The amount of any payment to be made
pursuant to this Section 1.7 shall bear interest from and including the Closing
Date to but excluding the date of payment at a rate per annum equal to eight
percent (8%). Such interest shall be payable at the same time as the payment to
which it relates and shall be calculated daily on the basis of a year of 365
days and the actual number of days elapsed.
1.8 REAL PROPERTY MATTERS.
(a) As of the Closing Date, regardless of whether BAC objects to the
same as provided hereinbelow, except as disclosed to and accepted by BAC as
provided elsewhere herein and except for Permitted Encumbrances, the Real
Property (other than any Real Property which is an Excluded Asset) shall not be
subject to (i) any mortgage, deed of trust, security deed, security agreement,
judgment, Lien or any other title exception created, caused, suffered or
incurred by Quincy's that is monetary in nature, Spartan hereby agreeing to pay
and satisfy of record any such monetary title defects or encumbrances prior to
or at Closing at Spartan's expense, or (ii) any leases (other than Cary (unit
#7209)), rental agreements or other rights of occupancy of any kind, whether
oral or written.
(b) With respect to each parcel of Real Property identified in Section
1.8(b) of the Disclosure Schedule, within ten (10) days after BAC shall have
received (i) a title commitment issued by a reputable title insurance company in
respect of such Real Property, and (ii) a survey of such parcel of Real
Property, BAC shall have notified Spartan in writing of any objections to,
defects in or encumbrances upon Quincy's title to or interest in such Real
Property, other than Permitted Encumbrances. Within five (5) business days of
Spartan's receipt of such notice, Spartan shall either (i) agree in writing to
satisfy some or all of such title defects and encumbrances or (ii) refuse in
writing to satisfy the same. If Spartan agrees in writing within such five (5)
day period to satisfy all such title defects and encumbrances prior to the
Closing Date and all such title defects and encumbrances are so satisfied prior
to the Closing Date, then the Stock Purchase shall be consummated in accordance
with the terms and conditions set forth herein. If Spartan does not agree in
writing within such five (5) day period to satisfy all such title defects and
encumbrances prior to the Closing Date or all such title defects and
encumbrances are not satisfied prior to the Closing Date, then BAC shall,
without limiting its rights set forth in the last sentence of this Section
1.8(b), elect either: (i) not to close the transaction contemplated
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hereby to the extent such election is permitted by Section 8.1, in which event
all parties shall be released from any further obligations or liabilities,
except as expressly set forth in Article 8 or otherwise; (ii) to close the
transaction contemplated hereby without regard to such unsatisfied defects and
encumbrances, in which event the transaction contemplated hereby shall be closed
in accordance with its terms, without a reduction in the Purchase Price, and all
such unsatisfied title defects and encumbrances shall be exceptions to Spartan's
warranty of title; or (iii) subject to Section 8.1(f), to close the transaction
contemplated hereby, excluding, however, the portion of the Real Property having
such title defects and encumbrances with a corresponding reduction in the
Purchase Price equal to the Value of such Real Property so excluded.
(c) In the event BAC does not timely notify Spartan in writing of any
such unacceptable defects in or encumbrances upon Quincy's title to such Real
Property as provided in Section 1.8(b) hereof, BAC shall be deemed to be
satisfied with Spartan's title to the Real Property and to have elected to close
pursuant to clause (ii) of Section 1.8(b) hereof.
(d) Other than in connection with Pre-Committed Sales, Spartan shall
cause the Quincy's Entities not to transfer, assign, sublease or encumber the
Real Property or any part thereof from the date hereof until the first to occur
of the Closing Date or the termination of this Agreement pursuant to Article 8
hereof without the prior written consent of BAC (which consent shall not be
unreasonably withheld or delayed), except for Permitted Encumbrances.
Notwithstanding anything in Section 1.8(b) hereof to the contrary, BAC shall
have the right to object to any title matters other than Permitted Encumbrances
which come into existence after the date of BAC's title examination but prior to
Closing.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller, jointly and severally, hereby represent and warrant to BAC
as follows:
2.1 ORGANIZATION, STANDING, AND POWER. Quincy's is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Alabama, and has the corporate power to carry on its business as now conducted
and to own, lease and operate its material Assets. Quincy's is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Quincy's Material Adverse Effect. The minute book and other
organizational documents for Quincy's have been made available to BAC for its
review and, except as disclosed in Section 2.1 of the Disclosure Schedule, are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and stockholders thereof.
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2.2 AUTHORITY OF QUINCY'S; NO BREACH BY AGREEMENT.
(A) The consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of Quincy's.
(B) The consummation of the transactions contemplated hereby will not
(i) conflict with or result in a breach of any provision of Quincy's Articles of
Incorporation or Bylaws or the certificate or articles of incorporation or
bylaws of any Quincy's Subsidiary or any resolution adopted by the board of
directors of any Quincy's Entity, or (ii) except as disclosed in Section 2.2 of
the Disclosure Schedule, constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any material Asset
of any Quincy's Entity under, any material Contract or material Permit of any
Quincy's Entity or, (iii) subject to receipt of the requisite Consents referred
to in Section 6.1(b), constitute or result in a Default under, or require any
Consent pursuant to, any Law or Order applicable to any Quincy's Entity or any
of their respective material Assets.
2.3 AUTHORITY OF SELLERS; NO BREACH BY AGREEMENT.
(A) SPARTAN.
(i) Spartan has the corporate power to execute and deliver
this Agreement and the Spartan Closing Documents and to perform its obligations
under this Agreement and the Spartan Closing Documents. This Agreement
represents a legal, valid, and binding obligation of Spartan, enforceable
against Spartan in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought). Upon the execution and delivery by Spartan of the Spartan Closing
Documents, the Spartan Closing Documents will constitute the legal, valid, and
binding obligations of Spartan, enforceable against Spartan in accordance with
their respective terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(ii) Neither the execution and delivery of this Agreement by
Spartan, nor the consummation by Spartan of the transactions contemplated
hereby, nor compliance by Spartan with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of Spartan's Articles of
Incorporation or Bylaws or the articles of incorporation or bylaws of any
Quincy's Entity, or (ii) except as disclosed in Section 2.3 of the Disclosure
Schedule, constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any material Asset of any
Quincy's Entity under, any material Contract or material
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Permit of any Quincy's Entity or, (iii) subject to receipt of the requisite
Consents referred to in Section 6.1(b), violate any Law or Order applicable to
Spartan or to any Quincy's Entity or any of their respective material Assets.
(iii) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and other than Consents required from Regulatory Authorities, and other
than notices to or filings with the Internal Revenue Service or the Pension
Benefit Guaranty Corporation with respect to any employee benefit plans, or
under the HSR Act, and other than Consents, filings, or notifications which, if
not obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Quincy's Material Adverse Effect, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
Spartan of the transactions contemplated in this Agreement.
(B) ADVANTICA.
(ii) Advantica has the corporate power to execute and deliver
this Agreement and the Advantica Closing Documents and to perform its
obligations under this Agreement and the Advantica Closing Documents. This
Agreement represents a legal, valid, and binding obligation of Advantica,
enforceable against Advantica in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought). Upon the execution and delivery by Advantica of the Advantica
Closing Documents, the Advantica Closing Documents will constitute the legal,
valid, and binding obligations of Advantica, enforceable against Advantica in
accordance with their respective terms (except in all cases in as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(ii) Neither the execution and delivery of this Agreement by
Advantica, nor the consummation by Advantica of the transactions contemplated
hereby, nor compliance by Advantica with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of Advantica's Articles of
Incorporation or Bylaws, or (ii) except as disclosed in Section 2.3 of the
Disclosure Schedule, constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any material Asset
of any Quincy's Entity under, any material Contract or material Permit of any
Quincy's Entity or, (iii) subject to receipt of the requisite Consents referred
to in Section 6.1(b), violate any Law or Order applicable to Advantica or to any
Advantica Entity or any of their respective material Assets.
(iii) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and other than Consents required
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from Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, and other than
Consents, filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Quincy's Material
Adverse Effect, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by Advantica of the transactions
contemplated in this Agreement.
2.4 CAPITAL STOCK.
(a) The authorized capital stock of Quincy's consists of (i) 20,000
shares of Quincy's Common Stock, of which 20,000 shares are issued and
outstanding as of the date of this Agreement and not more than 20,000 shares
will be issued and outstanding on the Closing Date, and (ii) no shares of
preferred stock are authorized, issued or outstanding. All of the issued and
outstanding shares of capital stock of Quincy's are duly and validly issued and
outstanding and are fully paid and nonassessable under the Alabama Business
Corporation Act. None of the outstanding shares of capital stock of Quincy's has
been issued in violation of any preemptive rights of the current or past
stockholders of Quincy's.
(b) Except as set forth in Section 2.4(a), or as disclosed in Section
2.4(b) of the Disclosure Schedule, there are no shares of capital stock or other
equity securities of Quincy's outstanding and no outstanding Equity Rights
relating to the capital stock of Quincy's. Spartan is the owner of all right,
title and interest (legal and beneficial) in and to the issued and outstanding
shares of Quincy's capital stock free and clear of all Liens. Except as
specifically contemplated by this Agreement, no Person has any Contract or any
preemptive right or privilege for the purchase from Spartan of any of the
Shares, or any Contract or Equity Right for the purchase, subscription or
issuance of any securities of or other equity interests in Quincy's.
2.5 QUINCY'S SUBSIDIARIES. Quincy's has disclosed in Section 2.5 of the
Disclosure Schedule all of the Quincy's Subsidiaries that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in which it is
qualified and/or licensed to transact business, and the number of shares owned
and percentage ownership interest represented by such share ownership) and all
of the Quincy's Subsidiaries that are general or limited partnerships, limited
liability companies, or other non-corporate entities (identifying the Law under
which such entity is organized, each jurisdiction in which it is qualified
and/or licensed to transact business, and the amount and nature of the ownership
interest therein). Except as disclosed in Section 2.5 of the Disclosure
Schedule, Quincy's or one of its wholly-owned Subsidiaries owns all of the
issued and outstanding shares of capital stock (or other equity interests) of
each Quincy's Subsidiary. No capital stock (or other equity interest) of any
Quincy's Subsidiary is required to be issued (other than to another Quincy's
Entity) by reason of any Equity Rights, and there are no Contracts or any
pre-emptive right or privilege by which any Quincy's Subsidiary is bound to
issue (other than to another Quincy's Entity) additional shares of its capital
stock (or other equity interests) or Equity Rights or by which any Quincy's
Entity is bound to transfer any shares of the capital stock (or other equity
interests) of any Quincy's Subsidiary (other than to another Quincy's Entity).
Except as disclosed in Section 2.5 of the Disclosure Schedule, there are no
Contracts adversely
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affecting or limiting the rights of any Quincy's Entity to vote or to dispose of
any shares of the capital stock (or other equity interests) of any Quincy's
Subsidiary. All of the shares of capital stock (or other equity interests) of
each Quincy's Subsidiary held by a Quincy's Entity are fully paid and
nonassessable under the applicable corporation Law of the jurisdiction in which
such Subsidiary is incorporated or organized and except as disclosed in Section
2.5 of the Disclosure Schedule, are owned by the Quincy's Entity free and clear
of any Lien. Except as disclosed in Section 2.5 of the Disclosure Schedule, each
Quincy's Subsidiary is a corporation, and each such Subsidiary is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power necessary for it to own, lease, and operate its Assets and to
carry on its business as now conducted. Each Quincy's Subsidiary is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Quincy's Material Adverse Effect.
2.6 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Advantica has timely filed and made available to BAC all SEC
Documents required to be filed by Advantica since December 31, 1996 (the
"Advantica SEC Reports"). The Advantica SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and other applicable Laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Advantica SEC Reports or necessary in order to make the statements in such
Advantica SEC Reports, in light of the circumstances under which they were made,
not misleading. Neither Quincy's nor any Quincy's Subsidiary is required to file
any SEC Documents.
(b) Except as disclosed in Section 2.6 of the Disclosure Schedule, each
of the Quincy's Financial Statements (including, in each case, any related
notes) was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved, and fairly presented in all material respects
the consolidated financial position of Quincy's and its Subsidiaries as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year end adjustments.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section
2.7 of the Disclosure Schedule, no Quincy's Entity has any Liabilities that are
reasonably likely to have, individually or in the aggregate, a Quincy's Material
Adverse Effect, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of Quincy's as of December 31, 1997, included in the
Quincy's Financial Statements delivered prior to the date of this Agreement or
reflected in the notes thereto. Except as disclosed in Section 2.7 of the
Disclosure Schedule,
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no Quincy's Entity has incurred any Liability since December 31, 1997, except
for such Liabilities incurred (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Quincy's Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement. Except as
disclosed in Section 2.7 of the Disclosure Schedule, no Quincy's Entity is
directly or indirectly liable, by guarantee or indemnity, to provide funds in
respect to any Liability of any Person for any amount in excess of $25,000.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997,
except as disclosed in the Quincy's Financial Statements delivered prior to the
date of this Agreement or as disclosed in Section 2.8 of the Disclosure
Schedule, there have been no events, changes, or occurrences which have had, or
are reasonably likely to have, individually or in the aggregate, a Quincy's
Material Adverse Effect.
2.9 TAX MATTERS.
(a) Except as set forth in Section 2.9 of the Disclosure Schedule,
insofar as is relevant to the Quincy's Entities, the Sellers have (i) filed all
federal income Tax Returns and all other material Tax Returns required to be
filed in respect of any Taxes, including ad valorem, real and personal property
taxes, and each such Tax return is complete and accurate in all material
respects, to the Knowledge of the Sellers, and (ii) paid all Taxes, including ad
valorem, real and personal property taxes, shown as due and payable in respect
of periods for which such Tax Returns were due.
(b) Except as set forth in Section 2.9 of the Disclosure Schedule,
insofar as is relevant to the Quincy's Entities, (i) no written notice of any
material proposed deficiency, claim, assessment or levy with respect to Taxes,
including ad valorem, real and personal property taxes, has been received by the
Sellers or the Quincy's Entities, (ii) to the Knowledge of the Sellers, there is
no claim or assessment threatened against the Quincy's Entities, (iii) none of
the Sellers or the Quincy's Entities has been since 1992 or is currently the
subject of a Tax Audit or any examination of any Tax Return and none of them has
received notice that it is being or will be audited by a relevant Taxing
Authority, (iv) all Taxes due as a result of any Tax Audit have been paid in
full, (v) no issues that have been raised by the relevant Taxing Authority in
connection with any Tax Audit are currently pending, (vi) none of the Sellers or
the Quincy's Entities has agreed to any extensions of time or waivers of any
applicable statute of limitations periods, and (vii) to the Knowledge of
Sellers, there is no Tax refund or deficiency Litigation currently pending.
(c) The Quincy's Entities have duly withheld from each payment from
which such withholding is required by Law (including, without limitation,
income, social security and employment tax withholding) all material Taxes so
required to be withheld and has paid the same, to the extent due, together with
the employer's share of the same if any, to the proper Taxing Authority.
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(d) Since January 1, 1990, the Quincy's Entities have been a member of
an "affiliated group" as that term is described under Section 1504 of the Code,
filing a consolidated federal income tax return, the common parent of which is
Advantica and has not been a member of any other affiliated group.
(e) The Quincy's Entities have not made any payments, and are not a
party to any agreement that obligates any of them to make any payments, that
would not be deductible, in whole or in part, under Sections 280G or 162(m) of
the Code.
(f) Spartan is not a foreign person subject to withholding under
Section 1445 of the Code.
2.10 ASSETS.
(a) Except for Permitted Encumbrances, as disclosed in Section 2.10 of
the Disclosure Schedule or as disclosed or reserved against in the Quincy's
Financial Statements delivered prior to the date of this Agreement, the Quincy's
Entities have good and marketable title, free and clear of all Liens, to all
Real Property and all other material Assets owned by the Quincy's Entities.
(b) All Assets which are material to Quincy's business on a
consolidated basis, held under leases or subleases by any of the Quincy's
Entities, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought).
(c) None of the Quincy's Entities has received written notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. Except as
disclosed in Section 2.10(c) of the Disclosure Schedule, there are presently no
claims for amounts exceeding in any individual case $25,000 pending under such
policies of insurance and no notices of claims in excess of such amounts have
been given by any Quincy's Entity under such policies.
2.11 INTELLECTUAL PROPERTY. Except as otherwise indicated on Section
2.11 of the Disclosure Schedule, each Quincy's Entity owns or has a license to
use all material Intellectual Property used in the Business. Except as otherwise
indicated on Section 2.11 of the Disclosure Schedule, each Quincy's Entity is
the owner of or has a license to any Intellectual Property sold or licensed to a
third party by such Quincy's Entity in connection with such Quincy's Entity's
business operations, and such Quincy's Entity has the right to convey by sale or
license any Intellectual Property so conveyed. No Quincy's Entity is in Default
in any material respect under any of its Intellectual Property licenses. No
proceedings are pending or to the Knowledge of
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Sellers threatened against any Quincy's Entity which challenge the rights of any
Quincy's Entity in Intellectual Property used, sold or licensed by such Quincy's
Entity in the course of its business. Except as disclosed in Section 2.11 of the
Disclosure Schedule, no Quincy's Entity is obligated to pay any recurring
royalties to any Person with respect to any such Intellectual Property.
2.12 ENVIRONMENTAL MATTERS. Except as set forth in Section 2.12 of
the Disclosure Schedule:
(a) To the Knowledge of the Sellers, each Quincy's Entity, its
Participation Facilities, and its Operating Properties are in compliance with
all Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Quincy's Material Adverse Effect;
(b) There is no Litigation pending before any court, governmental
agency, or authority in which any Quincy's Entity or any of its Operating
Properties or Participation Facilities (or Quincy's in respect of such Operating
Property or Participation Facility) has been or will be named as a defendant,
and Sellers have not received any written communication threatening any such
Litigation, (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, or affecting a site owned, leased, or operated by any
Quincy's Entity or any of its Operating Properties or Participation Facilities,
except for such Litigation pending or threatened that is not reasonably likely
to have, individually or in the aggregate, a Quincy's Material Adverse Effect;
and
(c) During the period of (i) any Quincy's Entity's ownership or
operation of any of their respective current properties, (ii) any Quincy's
Entity's participation in the management of any Participation Facility, or (iii)
any Quincy's Entity's holding of a security interest in a Operating Property,
there have been no releases, discharges, spillages, or disposals of Hazardous
Material in violation of applicable Environmental Law in, on, under, or
affecting such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a Quincy's Material Adverse Effect. Prior to
the period of (i) any Quincy's Entity's ownership or operation of any of their
respective current properties, (ii) any Quincy's Entity's participation in the
management of any Participation Facility, or (iii) any Quincy's Entity's holding
of a security interest in a Operating Property, to the Knowledge of Spartan and
Advantica, there were no releases, discharges, spillages, or disposals of
Hazardous Material in violation of applicable Environmental Law in, on, under,
or affecting any such property, Participation Facility or Operating Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a Quincy's Material Adverse Effect.
2.13 COMPLIANCE WITH LAWS. Each Quincy's Entity has in effect all
Permits necessary for it to own, lease, or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Quincy's Material Adverse Effect, and there has occurred no Default under
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any such Permit, other than Defaults which have been cured or are not reasonably
likely to have, individually or in the aggregate, a Quincy's Material Adverse
Effect. Except as disclosed in Section 2.13 of the Disclosure Schedule, none of
the Quincy's Entities
(a) is in Default under any of the provisions of its Articles of
Incorporation or Bylaws;
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for Defaults which are not
reasonably likely to have, individually or in the aggregate, a Quincy's Material
Adverse Effect; or
(c) since January 1, 1995, has received any written communication from
any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof asserting that any Quincy's Entity is
in any material respect not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces.
(d) Copies of all material reports, correspondence, notices and other
documents in the possession of Sellers and received within the two (2) years
preceding the date of this Agreement relating to any inspection, audit,
monitoring or other form of review or enforcement action by a Regulatory
Authority have been made available to BAC.
2.14 LABOR RELATIONS. To the Knowledge of Sellers, no Quincy's Entity
is the subject of any Litigation asserting that it or any other Quincy's Entity
has committed an unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel it or any other
Quincy's Entity to bargain with any labor organization as to wages or conditions
of employment, nor is any Quincy's Entity party to any collective bargaining
agreement, nor is there any strike involving any Quincy's Entity, pending or
threatened.
2.15 EMPLOYEE BENEFIT PLANS. Except as defined in Section 2.15 of
the Disclosure Schedule:
(a) Quincy's has disclosed in Section 2.15 of the Disclosure Schedule,
and has delivered or made available to BAC prior to the execution of this
Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by any Quincy's Entity or ERISA Affiliate thereof for the
benefit of its employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "Quincy's Benefit Plans"). Any of
the Quincy's Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to
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herein as a "Quincy's ERISA Plan." Each Quincy's ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referred to herein as a "Quincy's Pension Plan." No Quincy's Pension
Plan is or has been a multiemployer plan within the meaning of Section 3(37) of
ERISA;
(b) All Quincy's Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Quincy's Material Adverse Effect. Each Quincy's ERISA Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code has received a favorable determination letter from the Internal Revenue
Service, and Sellers are not aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the Knowledge of the
Sellers, no Quincy's Entity has engaged in a transaction with respect to any
Quincy's Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any Quincy's Entity to a Tax
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA in amounts which are reasonably likely to have, individually or in the
aggregate, a Quincy's Material Adverse Effect;
(c) No Quincy's Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors used by the plan's actuaries for funding purposes. Since the date of the
most recent actuarial valuation, there has been (i) no material change in the
financial position of any Quincy's Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Quincy's Pension Plan, and (iii) no increase in
benefits under any Quincy's Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually or in
the aggregate, a Quincy's Material Adverse Effect or materially adversely affect
the funding status of any such plan. Neither any Quincy's Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Quincy's Entity, or the single-employer
plan of any entity which is considered one employer with Quincy's under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, which is reasonably likely to have a Quincy's Material
Adverse Effect. No Quincy's Entity has provided, or is required to provide,
security to a Quincy's Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401 (a)(29) of the Internal Revenue Code nor has
any such plan incurred a "liquidity shortfall" as defined in Code Section
412(m)(5);
(d) Within the six-year period preceding the Closing Date, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any Quincy's Entity with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Quincy's Material
Adverse Effect. No Quincy's Entity has incurred any withdrawal Liability with
respect to a
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multiemployer plan under Subtitle B of Title IV of ERISA (regardless of whether
based on contributions of an ERISA Affiliate), which Liability is reasonably
likely to have a Quincy's Material Adverse Effect. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for any
Quincy's Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof. All premiums required to be paid under ERISA Section
4006 have been timely paid by a Quincy Entity and by its ERISA Affiliates;
(e) Except as disclosed in Section 2.15 of the Disclosure Schedule, no
Quincy's Entity has any Liability for retiree health and life benefits under any
of the Quincy's Benefit Plans and there are no restrictions on the rights of
such Quincy's Entity to amend or terminate any such retiree health or benefit
Plan without incurring any Liability thereunder, which Liability is reasonably
likely to have a Quincy's Material Adverse Effect;
(f) Except as disclosed in Section 2.15 of the Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any Quincy's Entity from any Quincy's
Entity under any Quincy's Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any Quincy's Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit, where such
payment, increase, or acceleration is reasonably likely to have, individually or
in the aggregate, a Quincy's Material Adverse Effect; and
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Quincy's Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Quincy's Financial Statements to the extent
required by and in accordance with GAAP.
2.16 MATERIAL CONTRACTS. Except as disclosed in Section 2.16 of the
Disclosure Schedule or otherwise reflected in the Quincy's Financial Statements,
none of the Quincy's Entities is a party to, or is bound by, (i) any employment,
severance or retirement Contract, or any consulting Contract with any current or
former employee of any Quincy's Entity or Advantica, (ii) any Contract relating
to the borrowing of money by any Quincy's Entity or the guarantee by any
Quincy's Entity of any such obligation (other than Contracts evidencing trade
payables and Contracts relating to borrowings or guarantees made in the ordinary
course of business), (iii) any Contract (other than Real Property Leases) which
in any material respect prohibits or restricts any Quincy's Entity from engaging
in competition with any other Person, (iv) any Contract between or among any
Quincy's Entity and any Advantica Entity, (v) any Contract relating to the
provision of data processing, network communication, or other technical services
to or by any Quincy's Entity, and (vi) any Contract relating to the purchase or
sale of any
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goods or services (other than Contracts involving payments under any individual
Contract not in excess of $250,000) (the "Quincy's Contracts"). With respect to
each Quincy's Contract and except as disclosed in Section 2.16 of the Disclosure
Schedule: (i) the Contract is in full force and effect; (ii) no Quincy's Entity
is in Default thereunder, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Quincy's Material Adverse Effect;
(iii) no Quincy's Entity has repudiated any material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
Sellers, in Default in any respect, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Quincy's Material Adverse
Effect, or has repudiated or waived any material provision thereunder.
2.17 LEGAL PROCEEDINGS. There is no Litigation pending against any
Quincy's Entity, and Sellers have not received any written communication
threatening any such Litigation, that is reasonably likely to have, individually
or in the aggregate, a Quincy's Material Adverse Effect, nor are there any
Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any Quincy's Entity, that are reasonably likely
to have, individually or in the aggregate, a Quincy's Material Adverse Effect.
Section 2.17 of the Disclosure Schedule contains a summary of all Litigation as
of the date of this Agreement to which any Quincy's Entity is a party and which
names a Quincy's Entity as a defendant or cross-defendant.
2.18 STATEMENTS TRUE AND CORRECT. All documents that any Quincy's
Entity or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of applicable Law.
2.19 REAL PROPERTY.
(A) Section 2.19(a) of the Disclosure Schedule contains a true and
correct list of each parcel of Real Property. Except as reflected in the
original or amended title insurance binders delivered to BAC or otherwise in
Section 2.19(a) of the Disclosure Schedule, Quincy's has or on the Closing Date
will have good and marketable fee simple title to the Real Property, free and
clear of all Liens other than Permitted Encumbrances.
(B) Section 2.19(b) of the Disclosure Schedule contains a true and
correct list of each parcel of real property which is leased by any Quincy's
Entity as tenant (the "Leased Real Property") and identifies each Contract
pursuant to which any Quincy's Entity leases the Leased Real Property (the "Real
Property Leases"). Quincy's is the lessee under each of the Real Property
Leases. Each Real Property Lease is in full force and effect and there is no
existing Default thereunder by Quincy's or, to the Knowledge of the Sellers, any
other party to such Real Property Leases. Except for Permitted Encumbrances, or
as described in Section 2.19(b) of the Disclosure Schedule, Quincy's' interest
in the Real Property Leases is free and clear of Liens, and is not subject to
any deeds of trust, assignments, subleases, or rights of any third parties
created by Quincy's other than the lessor thereof or any mortgagees of such
lessors. Section 2.19(b) of the Disclosure Schedule identifies each Real
Property Lease which contains use restrictions.
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(C) Except as otherwise indicated in Section 2.19(c) of the Disclosure
Schedule, all improvements on the Real Property and the Leased Real Property
conform to all applicable state and local laws, use restrictions, building
ordinances, and health and safety ordinances, except to the extent any failure
to conform is not reasonably likely to have a Quincy's Material Adverse Effect,
and Sellers have not received written notice that any such property is not zoned
for the various purposes for which the Real Property and the Leased Real
Property and improvements thereon are presently being used.
(D) Except as otherwise indicated in Section 2.19(d) of the Disclosure
Schedule, Quincy's has received no written notice of any pending or threatened
condemnations, planned public improvements, annexation, special assessments,
zoning or subdivision changes, or other adverse claims affecting the Real
Property or the Leased Real Property.
(E) Except for Permitted Encumbrances and except as identified on
Section 2.19(e) of the Disclosure Schedule, to the Knowledge of the Sellers,
there is no private restrictive covenant or governmental use restriction
(including zoning), on all or any portion of the Real Property or the Leased
Real Property which prohibits the current use of the Real Property and the
Leased Real Property.
(F) To the Knowledge of Sellers, all Permits and Consents required for
the occupancy and operation of the Real Property and the Leased Real Property
(with appurtenant parking uses) as presently being used have been obtained and
are in full force and effect and no notices of violations in connection with
such items have been received by or on behalf of Quincy's.
(G) There are no studies or reports prepared by or on behalf of Sellers
or any Quincy's Entity or, to the Knowledge of Sellers, by any other third party
which indicate any defects in the design or construction of any of the
improvements on the Real Property or the Leased Real Property.
(H) Quincy's has not failed to pay any Taxes or other charges which any
Quincy's Entity is obligated to pay and which adversely affect the present use
of the Real Property or Leased Real Property.
(I) There is no pending Litigation, and no Quincy's Entity has received
during the two (2) years immediately preceding the date hereof notice of any
disputes, concerning the location of the lines and corners of the Real Property,
and no Quincy's Entity has been served with any legal action concerning the
location of the lines and corners of the Real Property.
(J) No Person, other than BAC, has any right, agreement, commitment,
option, right of first refusal or any other agreement, whether oral or written,
with respect to the lease, purchase, assignment or transfer of all or any
portion of the Real Property or the Leased Real Property other than Permitted
Encumbrances and other than as stated in Section 2.19(j) of the Disclosure
Schedule.
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(K) Except as described on Section 2.19(k) of the Disclosure Schedule,
no commitment has been made by or on behalf of Quincy's to any governmental
authority, utility company, school board, church or other religious body,
homeowner or homeowner's association or any other organization, group or
individual relating to the Real Property which would impose an obligation upon
Quincy's or its successors or assigns to make any contributions or dedications
of money or any part of the Real Property, or to construct, install or maintain
any improvements of a public or private nature as part of the Real Property.
(L) Except as shown on the surveys being obtained by Sellers in
connection with the transactions contemplated hereby, the parcels comprising the
Real Property constitute separately subdivided, legally distinct parcels of
land. Quincy's has complied with all applicable laws, ordinances, regulations,
statutes, rules and restrictions pertaining to and affecting the Real Property
which relate to such subdivision.
(M) Except as shown on the surveys being obtained by Sellers in
connection with the transactions contemplated hereby and except as described on
Section 2.19(m) of the Disclosure Schedule, there is no default or breach by
Quincy's nor have Sellers received written notice of a breach of any other party
thereto, under any covenants, conditions, restrictions or easements which may
affect the Real Property or any portion or portions thereof which are to be
performed or complied with by the owner of the Real Property or the Leased Real
Property, and no condition or circumstance exists which, with the giving of
notice or the passage of time, or both, would constitute a Default or breach by
Quincy's nor, to the Knowledge of the Sellers, any other party thereto, under
any such covenants, conditions, restrictions, rights-of-way or easements.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BAC
BAC hereby represents and warrants to Spartan and Advantica as follows:
3.1 ORGANIZATION, STANDING, AND POWER. BAC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power to carry on its business as now conducted
and to own, lease and operate its material Assets. BAC is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a BAC Material Adverse Effect.
3.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) BAC has the corporate power necessary to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The
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execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Stock Purchase, have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of BAC. This Agreement represents a legal, valid, and binding
obligation of BAC, enforceable against BAC in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' fights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by BAC, nor
the consummation by BAC of the transactions contemplated hereby, nor compliance
by BAC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of BAC's Certificate of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any material Asset of any BAC Entity
under, any material Contract or material Permit of any BAC Entity, where such
Default or Lien, or any failure to obtain such Consent, is reasonably likely to
have, individually or in the aggregate, a BAC Material Adverse Effect, or, (iii)
subject to receipt of the requisite Consents referred to in Section 6.1(b),
violate any Law or Order applicable to any BAC Entity or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and other than
Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act,
and other than Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a BAC
Material Adverse Effect, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by BAC of the Stock Purchase
and the other transactions contemplated in this Agreement,
3.3 LEGAL PROCEEDINGS. There is no Litigation pending, or, to the
Knowledge of BAC, threatened against any BAC Entity that is reasonably likely to
have, individually or in the aggregate, a BAC Material Adverse Effect, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any BAC Entity, that are reasonably likely to
have, individually or in the aggregate, a BAC Material Adverse Effect.
3.4 STATEMENTS TRUE AND CORRECT. All documents that any BAC Entity or
any Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law
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3.5 SECURITIES ACT. BAC is acquiring the Shares solely for the purpose
of investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act. BAC acknowledges that
the Shares are not registered under the Securities Act or any applicable state
securities laws, and that such Shares may not be transferred or sold except
pursuant to the registration provisions of the Securities Act or pursuant to an
applicable exemption therefrom and pursuant to state securities laws and
regulations as applicable.
3.6 BAC'S INVESTIGATION. BAC is an informed and sophisticated purchaser
and is experienced in the evaluation and purchase of companies such as Quincy's.
Except for investigations of title to Real Property described in Section 1.8
hereof, BAC has undertaken such investigations as it has deemed necessary to
enable it to make an informed and intelligent decision with respect to this
Agreement, and BAC acknowledges that Sellers and the Quincy's Entities have
allowed BAC such access as has been reasonably requested by BAC to the
personnel, property, premises and records of the Quincy's Entities for this
purpose. To the extent expressly permitted hereafter under this Agreement, BAC
will undertake such further investigation as it deems necessary. BAC
acknowledges that in entering this Agreement, and acquiring the Shares and in
consummating the other transactions contemplated herein, BAC has relied solely
upon its own investigation and analysis and, to the extent expressly permitted
by this Agreement, the representations and warranties contained in this
Agreement, and that none of the Sellers and the Quincy's Entities (and any of
their respective Representatives and Affiliates) has made any representation or
warranty as to the Sellers, the Quincy's Entities, the Shares, this Agreement or
the business of the Quincy's Entities except as expressly set forth in this
Agreement, and BAC agrees, to the fullest extent permitted by Law, that, except
as expressly provided for herein or pursuant to the express provisions hereof,
none of Sellers (and their respective Representatives and Affiliates) shall have
any liability to BAC or the Quincy's Entities (or any of their respective
Representatives or Affiliates) on any basis based upon any information made
available or statements made to BAC (or any of its Representatives or
Affiliates).
ARTICLE 4
CONDUCT OF BUSINESS PENDING CONSUMMATION
4.1 AFFIRMATIVE COVENANTS WITH RESPECT TO QUINCY'S. From the date of
this Agreement until the earlier of the Closing Date or the termination of this
Agreement, unless the prior written consent of BAC shall have been obtained,
which consent shall not be unreasonably withheld or delayed, and except as
otherwise expressly contemplated herein, Sellers shall and shall cause Quincy's
and each Quincy's Subsidiary to (a) operate its business only in the ordinary
course, and (b) use its reasonable efforts to preserve intact its business
organization and Assets and to maintain its rights and franchises.
4.2 NEGATIVE COVENANTS WITH RESPECT TO QUINCY'S. From the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement, unless the prior written consent of BAC shall have been obtained,
which consent shall not be unreasonably withheld or delayed, and except as
otherwise expressly contemplated herein, Sellers covenant
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and agree that they shall cause Quincy's not to do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any Quincy's Entity, or
(b) incur any additional indebtedness for borrowed money (other than
indebtedness of a Quincy's Entity to another Quincy's Entity) or enter into any
capital lease requiring payments in excess of an aggregate of $100,000 (for the
Quincy's Entities on a consolidated basis) except in the ordinary course of the
business of Quincy's Subsidiaries consistent with past practices, or impose, or
suffer the imposition, on any material Asset of any Quincy's Entity of any Lien
other than Permitted Encumbrances and other than in connection with Liens in
effect as of the date hereof that are disclosed in the Disclosure Schedule; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any Quincy's Entity, or declare or pay any dividend or make any
other distribution in respect of Quincy's capital stock; or
(d) except for this Agreement, issue, sell, pledge, encumber, authorize
the issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of Quincy's Common Stock or any other capital stock of any
Quincy's Entity, or any stock appreciation rights, or any option, warrant, or
other Equity Right in respect of the capital stock of any Quincy's Entity; or
(e) adjust, split, combine or reclassify any capital stock of any
Quincy's Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Quincy's Common Stock, or sell,
lease, mortgage or otherwise dispose of or otherwise encumber (x) any shares of
capital stock of any Quincy's Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another Quincy's Entity) or (y) any Asset
having a book value in excess of $20,000 other than in the ordinary course of
business; or
(f) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or less,
purchase any securities or make any material investment, either by purchase of
stock or securities, contributions to capital, Asset transfers, or purchase of
any Assets, in any Person other than a wholly owned Quincy's Subsidiary, or
otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or (ii) the
creation of new wholly owned Subsidiaries organized to conduct or continue
activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Quincy's Entity, except in the ordinary course of business or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written
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Contracts in effect on the date of this Agreement and disclosed in Section
4.2(g) of the Disclosure Schedule; or enter into or amend any severance
agreements or arrangements with any employees or officers of any Quincy's
Entity; or grant any material increase in fees or other increases in
compensation or other benefits to officers or directors of any Quincy Entity
except in accordance with past practice as described in Section 4.2(g) of the
Disclosure Schedule and except as otherwise disclosed in Section 4.2(g) of the
Disclosure Schedule; or
(h) enter into or amend any written employment Contract between any
Quincy's Entity and any Person (unless such amendment is required by Law) that
provides for severance or similar payments (other than payments to be made
pursuant to severance or similar policies currently in effect and described in
Section 4.2(h) of the Disclosure Schedule) if the Quincy's Entity does not have
the unconditional right to terminate any such Contract without Liability (other
than Liability for services already rendered), at any time on or after the
Closing Date; or
(i) adopt any new employee benefit plan of any Quincy's Entity or
terminate or withdraw from, or make any material change in or to, any existing
employee benefit plans of any Quincy's Entity other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan, or make any distributions
from such employee benefit plans, except as required by Law, the terms of such
plans or consistent with past practice; or
(j) make any material change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP or
otherwise in the ordinary course of business; or
(k) except in the ordinary course of business, commence any Litigation
other than in accordance with past practice, settle any Litigation involving any
Liability of any Quincy's Entity for material money damages or restrictions upon
the operations of any Quincy's Entity, or
(l) except in the ordinary course of business, enter into, modify,
amend or terminate any material Contract or release, compromise or assign any
material rights or claims.
4.3 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Quincy's Material Adverse Effect or a BAC Material Adverse Effect,
as applicable, or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
ARTICLE 5
ADDITIONAL AGREEMENTS
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5.1 APPLICATIONS; ANTITRUST NOTIFICATION. BAC shall promptly prepare
and file, and Spartan and Advantica shall cooperate and cause Quincy's to
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement. To the extent
required by the HSR Act, each of the Parties will promptly file with the United
States Federal Trade Commission and the United States Department of Justice the
notification and report form required for the transactions contemplated hereby
and any supplemental or additional information which may reasonably be requested
in connection therewith pursuant to the HSR Act and will comply in all material
respects with the requirements of the HSR Act. The filing fee relating to any
notification and report form required by the HSR Act for the transactions
contemplated hereby shall be paid by BAC.
5.2 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 6, provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
5.3 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Closing Date, Sellers shall keep BAC advised of all
material developments relevant to the Business and to consummation of the Stock
Purchase and shall permit BAC to make or cause to be made such investigation of
the business and properties of Quincy's and its Subsidiaries and of their
respective financial and legal conditions as BAC reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere with normal operations without the
prior consent of Advantica, which consent shall not be unreasonably withheld or
delayed. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Except as required by law, from the date hereof to and through the
Closing Date, no Party shall make any announcement, nor will such Party discuss
the transactions contemplated hereby with any third party, other than such
Party's accountants, attorneys, or financial advisors, without the prior consent
of the other Parties hereto. From the date hereof to and through the Closing
Date, the Parties shall maintain in confidence, and cause their respective
agents, representatives, accountants, counsel and other advisors to maintain in
confidence, any written, oral or other information obtained from any other Party
or Parties in connection with the Transaction, unless (i) such information is
already known to such Party or to others not bound by
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a duty of confidentiality or such information is or becomes publicly available
through no fault of such Party, (ii) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions contemplated by this Agreement, or
(iii) the furnishing or use of such information is required by or necessary or
appropriate in connection with a legal proceeding.
5.4 PRESS RELEASES. Prior to the Closing Date, the Parties shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 5.4
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
5.5 LIMITATION OF LIABILITIES.
(a) From and after the Closing Date, except as expressly provided in
this Agreement (including, without limitation, provisions relating to Excluded
Liabilities), no member of the Retained Group shall have any obligation or
liability whatsoever relating to the Business or Assets of any of the Quincy's
Entities as the same shall exist on the Closing Date or arise thereafter,
including, without limitation, obligations or liabilities for any deductibles
with respect to any insurance policies (including, without limitation, any
arrangement between any Quincy's Entity, on the one hand, and any member of the
Retained Group, on the other hand, with respect to self-insurance) and
obligations or liabilities under any guarantees by any member of the Retained
Group of any obligations or liabilities (other than Excluded Liabilities) of any
Quincy's Entity. From and after the Closing Date, BAC shall, and BAC shall cause
the Quincy's Entities to, indemnify and hold the Retained Group harmless from
all such obligations and liabilities (including the cost of defense thereof and
reasonable attorneys' fees and expenses incurred in litigation or otherwise)
that are alleged against or might be imposed on any member of the Retained
Group. BAC shall cooperate with the Retained Group, both before and after the
Closing Date, by taking, and after the Closing, causing the Quincy's Entities to
take, all actions which Sellers shall reasonably request, excluding payment of
any monetary consideration, to effect the termination, contingent upon Closing,
of any such Retained Group guarantee, obligation or liability and, both before
and after the Closing, BAC shall use its reasonable efforts to provide,
contingent upon Closing, a substitute guarantee or other arrangement to release
the Retained Group from any liability or obligation under any such guarantee,
obligation or liability; provided, however, that no such substitute guarantee or
other arrangement need be obtained in respect of the guarantee by any member of
the Retained Group of any Real Property Lease. To the Knowledge of Sellers,
Section 5.5(a) of the Disclosure Schedule includes a complete list of all
guarantees or other agreements binding upon the members of the Retained Group in
respect to obligations (other than Excluded Liabilities) of the Quincy's
Entities. In addition, on or prior to Closing, BAC will obtain, or will cause
the Quincy's Entities to obtain, one or more insurance policies or other
arrangements covering substantially all of the liabilities and obligations
(other than Excluded Liabilities) of the Quincy's Entities arising after the
Closing Date which are currently insured pursuant to insurance policies or
arrangements provided or paid for by any
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member of the Retained Group. At Closing, BAC shall provide to Sellers
certificates of insurance evidencing that substitute coverage has been obtained.
The parties agree that the Quincy's Entities will be removed from the insurance
policies maintained or provided by the Retained Group as of the Closing Date
with respect to all liabilities and obligations arising after the Closing Date.
The elimination of the Quincy's Entities from coverage maintained or provided by
the Retained Group shall be without prejudice to the indemnification and
reimbursement obligations of BAC and the Quincy's Entities.
(b) Prior to or contemporaneously with the Closing, Sellers shall (i)
assume and agree to timely pay and perform, and cause the Quincy's Entities to
be released and discharged from, all liabilities, restrictions and obligations
under or incurred pursuant to the Advantica Credit Agreement, and cause to be
delivered at the Closing release documents, duly executed by or on behalf of the
applicable secured parties, providing for the release of all Liens on any Assets
of the Quincy's Entities which secure payment or performance of such liabilities
and obligations, and (ii) assume and agree to timely pay and perform, and use
reasonable efforts to cause the Quincy's Entities to be released and discharged
from, the obligations and liabilities of the Quincy's Entities listed or
described in Section 5.5(b) of the Disclosure Schedule (other than those
described in the preceding clause (i)) and use reasonable efforts to cause to be
terminated, released or otherwise removed all Liens on any Assets of the
Quincy's Entities which secure the payment or performance of such liabilities
and obligations, in each of the foregoing cases in accordance with the terms and
provisions of the instruments evidencing the liabilities and obligations to be
assumed or as otherwise agreed by the applicable parties thereto and without
liability, cost or expense to BAC or the Quincy's Entities and without the sale
or other disposition of Assets so encumbered. From and after the Closing Date,
except as otherwise expressly provided in this Agreement, none of the Quincy's
Entities shall have any obligation or liability with respect to the Excluded
Liabilities or whatsoever relating to the business or assets of any member of
the Retained Group as the same exist at the Closing Date or arise thereafter,
including, without limitation, obligations or liabilities under any guarantees
by any of the Quincy's Entities of any obligations or liabilities of the
Retained Group. From and after the Closing Date, Sellers shall indemnify and
hold BAC and the Quincy's Entities harmless from the Excluded Liabilities and
all such obligations and liabilities (including the cost of defense thereof and
reasonable attorneys' fees and expenses incurred in litigation or otherwise)
that are alleged against or might otherwise be imposed on the Quincy's Entities.
Sellers shall cooperate with BAC and the Quincy's Entities, both before and
after the Closing, by taking, and after Closing, causing the Retained Group to
take, all actions necessary or appropriate, or which BAC or the Quincy's
Entities shall reasonably request, excluding payment of any monetary
consideration, to effect the termination, contingent upon Closing, of any such
Quincy's Entity guarantee, obligation or liability and, both before and after
the Closing, Sellers shall use their reasonable efforts to provide, contingent
upon Closing, a substitute guarantee or other arrangement to release the
Quincy's Entities from any liability or obligation under any such guarantee,
obligation or liability. In addition, on or prior to Closing, Sellers will
obtain, or cause the Retained Group to obtain, one or more insurance policies or
other arrangements covering substantially all Excluded Liabilities to the extent
such Excluded Liabilities are currently insured pursuant to insurance policies
or arrangements provided or paid for by any member of the Retained Group or
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the Quincy's Entities. To the extent such substitute insurance is required
pursuant to the preceding sentence, at the Closing, Sellers will provide to BAC
certificates of insurance evidencing that substitute coverage has been obtained.
5.6 TRANSITION SERVICES AGREEMENT. At the Closing the Parties shall
enter into a Transition Services Agreement consistent with the term sheet
attached hereto as EXHIBIT 5.6, pursuant to which Advantica or one of its
Affiliates shall provide to Quincy's accounting, purchasing, data base, payroll
and related systems support services of a quality and frequency substantially
similar to those currently provided by the Retained Group to Quincy's for up to
ten months following the Closing at no cost to BAC or Quincy's (including but
not limited to costs and expenses relating to or arising out of Advantica's
agreement with IBM Global Services (ISSC)); provided, however, that such
agreement shall not require the provision of in-restaurant point of sale or
related computer maintenance and further provided that, other than payments to
IBM Global Services (ISSC), no member of the Retained Group shall have any
obligation to pay any third party in connection with providing any services
pursuant to the Transition Services Agreement and, to the extent that any such
payments to third parties will be required consistent with past practice, all
such payments will be made by BAC. BAC shall have options to extend the term of
the Transition Services Agreement from month to month for up to an additional
two months for a payment of $200,000 per month made by BAC to Advantica.
5.7 EMPLOYEE MATTERS.
(a) Employment. On the Closing Date, BAC or Quincy's shall:
(i) continue to employ all field and Restaurant employees
employed by each Quincy's Entity as of the Closing Date (the "Field
Employees");
(ii) continue to employ all employees other than Field
Employees employed by each Quincy's Entity as of the Closing Date (the
"Non-Field Employees") except those individuals named in Section
5.7(a)(ii) of the Disclosure Schedule; (the "Excluded Employees"); and
(iii) have the right to offer employment to those individuals
named in Section 5.7(a)(iii) of the Disclosure Schedule (the "Other
Employees"),
except as otherwise agreed among the Parties. All such individuals so employed
or hired are hereinafter referred to as the "Hired Employees." Sellers expressly
acknowledge and agree that no counteroffer shall be made by Advantica or any
Advantica Affiliate to any Other Employee to whom an offer of employment is made
pursuant to Section 5.7(a)(iii) above. Except as expressly assumed by BAC,
Sellers shall be responsible for all costs and liabilities attributable to the
Other Employees occurring prior to the Closing Date. Except as expressly assumed
by Sellers, BAC and Quincy's shall be responsible for all costs and liabilities
attributable to the Field Employees and the Non-Field Employees occurring prior
to the Closing Date. BAC and Quincy's shall be responsible for all costs and
liabilities attributable to the Hired Employees arising on and after
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the Closing Date. Effective at the Closing Date, Advantica shall cause any
member of the Retained Group to release all Hired Employees from any employment
and/or confidentiality agreement previously entered into between any member of
the Retained Group and such Hired Employees relating to the Business to the
extent (but only to the extent) necessary for BAC to operate the Business in the
same manner as operated by Quincy's prior to the Closing Date.
(b) Non-Solicitation. For a period commencing on the date hereof and
expiring on the first (1st) anniversary of the Closing Date, neither Sellers nor
any Advantica Affiliate shall directly or indirectly solicit, offer employment
to (i) any Field Employee, (ii) any Non-Field Employee other than those named in
Section 5.7(a) of the Disclosure Schedule or (iii) any Other Employee who
accepts an offer of employment made pursuant to Section 5.7(a)(iii) above,
without the prior written consent of BAC. None of the Retained Group shall be in
breach of the provisions of this paragraph (b) as a result of or on account of
(i) the solicitation or offer of employment to any of the persons described in
this paragraph (b) who, at the time of such solicitation or offer of employment,
is no longer an employee of any of BAC and the Quincy's Entities, unless such
person left the employment of BAC or a Quincy's Entity at the request or
instigation of any member of the Retained Group (other than a general
solicitation not targeted at Quincy's employees).
5.8 INTELLECTUAL PROPERTY MATTERS. The Parties acknowledge that the
Intellectual Property identified in Section 5.8 of the Disclosure Schedule which
is used in and useful to the continuing operation of the Business is currently
owned by Advantica or Advantica has a valid and enforceable, royalty free,
perpetual license to use such Intellectual Property in the Business (the
"Advantica Intellectual Property"). At the Closing, Advantica shall assign,
license, sublicense, convey and deliver to BAC or Quincy's all such Advantica
Intellectual Property in consideration for the sum of ONE MILLION DOLLARS
($1,000,000) payable to Advantica by BAC in immediately available funds on the
Closing Date pursuant to an instrument or instruments reasonably satisfactory to
BAC and Advantica.
5.9 MERGER OF QUINCY'S. BAC and Sellers acknowledge and agree that
Sellers intend to merge Quincy's Realty, Inc., an Alabama corporation
wholly-owned by Quincy's, with and into Quincy's such that Quincy's is the
surviving corporation. Such merger of Quincy's Realty, Inc. with and into
Quincy's is expressly hereby permitted by this Agreement and shall not result in
any breach of any provision of this Agreement.
5.10 RETENTION OF BOOKS AND RECORDS. BAC shall cause the Quincy's
Entities to retain, until all applicable tax statutes of limitations (including
periods of waiver) have expired, all books, records and other documents
pertaining to the Quincy's Entities in existence on the Closing Date that are
required to be retained under the Quincy's Entities' current retention policies
and to make the same available after the Closing Date for inspection and copying
by Advantica or its agent at Advantica's expense, during regular business hours
and upon reasonable request and reasonable advance written notice. After the
expiration of such period, no such books and records shall be destroyed by BAC
without first advising Advantica and giving Advantica an opportunity to obtain
possession thereof. Advantica agrees that the confidentiality
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of such records will be maintained and that such records will be used only for
tax or other business purposes.
5.11 CASH SWEEPS. Notwithstanding any other provision of this Agreement
to the contrary, prior to the Closing, the bank accounts of the Quincy's
Entities will continue to be swept on a daily basis, consistent with past
practice.
5.12 NEW BANK ACCOUNTS. BAC acknowledges and agrees that the bank
accounts identified in Section 5.12 of the Disclosure Schedule shall be
transferred to the Retained Group effective upon Closing. Consequently, on or
before the Closing Date, BAC shall establish, with the cooperation of Sellers,
suitable bank accounts such that, commencing immediately after the Closing Date,
BAC can utilize such accounts in connection with the operation of the Business
and will no longer need to utilize the bank accounts identified in Section 5.12
of the Disclosure Schedule. All collections attributable to the operation of the
Business up to and including the close of business on the Closing Date shall be
for the benefit of the Retained Group, and all collections attributable to the
operation of the Business after the close of business on the Closing Date shall
be for the benefit of the Quincy's Entities and BAC. Sellers and the Quincy's
Entities agree to make appropriate payments to reflect such intention.
5.13 EMPLOYEE BENEFIT PLANS.
(a) Termination of Participation in Quincy's Benefit Plans. The Sellers
shall cause each Quincy's Entity to terminate its participation in all Quincy's
Benefit Plans (as defined in Section 2.15) immediately prior to the Closing,
with no resulting cost, liability or expense to Quincy's or BAC except to the
extent provided by this Agreement.
(b) Establishment of New Plans. Concurrently with the Closing, BAC
shall cause Quincy's to establish the plans and programs (the "New Plans")
providing the following benefits: medical, dental, vision, long-term disability,
short-term disability, and life insurance. The New Plans' provisions shall
provide for employee participation and benefits identical (unless otherwise
agreed to in writing by the Parties) to those provided by Quincy's prior to the
Closing. To the extent the benefits administration provisions of the Transition
Services Agreement remain applicable, the New Plans' benefits shall be on a "no
loss/no gain basis" so that there are no new preexisting condition exclusions or
waiting periods imposed on, or evidence of insurability required of participants
covered in the comparable Quincy's Benefit Plans prior to the Closing (except to
the extent those periods, conditions and other limitations were imposed prior to
the Closing), and so that benefits paid prior to the Closing by the comparable
Quincy's Benefit Plans are credited towards deductibles, co-payment,
out-of-pocket, and similar limitations. Neither Quincy's nor BAC will terminate
health coverage for Hired Employees during the 90 day period immediately
following the Closing DateNotwithstanding the foregoing, nothing in this
Agreement shall prevent Quincy's or BAC from amending or terminating the New
Plans after the period provided for in the Transition Services Agreement. The
foregoing is on the basis that all insurers or providers under Quincy's Benefits
Plans will be insurers or providers under the New Plans and that any such
insurer or provider agrees to the foregoing requirements without any
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material incremental cost to Quincy's. If any insurer or provider will not so
do, the Parties will mutually and reasonably agree to any variation from the
foregoing requirement.
(c) Handling of Medical and Similar Claims. The Quincy's Benefit Plans
will process and pay medical and other benefit claims in the normal course
through the day prior to the Closing. On and after the Closing, the New Plans
shall be liable for any claims of Field Employees (and eligible spouses and
dependent of Field Employees, COBRA continuees who would have been Field
Employees if employed by the Quincy's Entities as of the Closing and "Qualified
Beneficiaries" under ERISA of such COBRA continuees) which had not yet been
finally processed and paid by the comparable Quincy's Benefit Plans (regardless
of whether those claims were incurred on or before the Closing, and regardless
of whether claims had yet been filed). The Quincy's Benefit Plans shall not pay
or be responsible for any such claim which it had not yet processed and paid
prior to the Closing, and shall forward such claims to the New Plans.
(d) Sellers' Cooperation Regarding New Plans. The Sellers will
cooperate with Quincy's and BAC in establishing the New Plans and utilizing the
Quincy's Benefits Plans' current third party service providers (to the extent
such third parties agree to do so) during the Transition Period provided for in
the Transitional Services Agreement under Section 5.6. However, the Sellers
disclaim any responsibility for enrollment following the Closing and any
undertaking to provide services which could cause the Sellers to become
fiduciaries with respect to the New Plans. Nothing in this Agreement or in any
services provided by Sellers shall be construed to imply that, on or after
Closing, Seller is a sponsor or co-sponsor of any Quincy's Benefit Plan or any
plan maintained by Advantica or its Affiliates. Quincy's and BAC agree to pay
all third party service providers directly to the greatest extent possible.
Additional requirements regarding the New Plans may be specified in the
Transitional Services Agreement, including Quincy's and BAC's indemnification of
Sellers and Advantica and including Sellers' and Advantica's indemnification of
Quincy's and BAC.
(e) Excluded Employees. At or prior to the Closing, Sellers shall cause
Quincy's to terminate the employment of the Excluded Employees. Sellers shall be
responsible for and shall defend, indemnify and hold BAC and Quincy's harmless
from and against all obligations and liabilities, under Quincy's Benefit Plans
or otherwise, with respect to the termination of employment of the Excluded
Employees. With respect to any Excluded Employee (including any beneficiary or
dependent thereof), Sellers shall be responsible for and shall defend, indemnify
and hold BAC and Quincy's harmless from and against all liabilities and
obligations relating to claims, expenses, illnesses, injuries and any other
occurrences on or prior to the Closing and any liabilities under Quincy's
Benefit Plans arising out of periods prior to the Closing and any liabilities
under Quincy's Benefit Plans arising out of periods prior to the Closing.
Notwithstanding the foregoing, with respect to any Excluded Employee who is
terminated by Quincy's at or prior the Closing and not thereafter employed by
the Retained Group and who is hired by BAC, the Quincy's Entities or any of
their Affiliates within six (6) months immediately after the Closing Date, BAC
or the Quincy's Entities shall reimburse Sellers for any and all obligations
incurred by any member of the Retained Group in connection with
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such termination of the employment of such Excluded Employee and such Excluded
Employee shall be treated as a Field Employee for purposes of Subsection (c)
above and Subsection (f) below.
(f) Field Employees. Subject to the limitations described in
Subsections (b) and (c) above, from and after the Closing Date, BAC agrees that
all Field Employees shall be eligible to participate in BAC's employee benefit
plans and programs (including eligibility for vacation and sick leave) and shall
be given credit for past service with Quincy's for purposes of eligibility,
vesting, deductibles, co-payments and pre-existing conditions as if such
employee had been employed by BAC to the extent permitted by applicable
nondiscrimination rules under the Code and to the extent permitted by such plans
and programs.
(g) No Third-Party Beneficiaries. No provision of this Agreement shall
create any third party beneficiary or other rights in any employee or former
employee (including any beneficiary or dependent thereof) of Sellers or Quincy's
in respect of continued employment (or resumed employment) with either BAC or
Quincy's or any of BAC's or Sellers' Affiliates and no provision of this
Agreement shall create any such rights in any such employee or former employee
in respect of any benefits that may be provided, directly or indirectly, under
any Quincy's Benefit Plan or any plan or arrangement which may be established by
BAC or Quincy's. No provision of this Agreement shall constitute a limitation on
rights to amend, modify or terminate after the Closing Date any such plans or
arrangements of Sellers, BAC or any of their respective Affiliates or Quincy's.
5.14 OPERATION OF RETAINED RESTAURANTS. At the Closing, BAC and Sellers
shall enter into a license agreement pursuant to which BAC shall grant to
Sellers a royalty-free license to use during the year commencing on the Closing
Date and ending on the first anniversary of the Closing Date the "Quincy's"
brand name solely with respect to the operation of any Restaurant which has
operated up to the Closing Date under the "Quincy's" brand name and which is
transferred from any Quincy's Entity to Spartan or its designee in accordance
with Section 1.2.
5.15 CONDITION OF ASSETS. If on or prior to the Closing Date any of the
Assets shall have suffered loss or damage on account of fire, flood, accident,
act of war, civil commotion, or any other cause or event beyond the reasonable
power and control of Sellers (whether or not similar to the foregoing) to an
extent which, in the reasonable opinion of BAC, materially affects the value of
the Assets, taken as a whole, BAC shall have the right (a) to terminate this
Agreement and all of BAC's obligations hereunder without incurring any liability
to Sellers or any Advantica Affiliate as a result of such termination, (b) to
consummate the transactions provided for herein and be paid the full amount of
all insurance proceeds, if any, paid or payable to Sellers or any Advantica
Affiliate, in respect of such loss plus an amount equal to any deductible or
co-insurance reserve applicable to such loss, or (c) subject to Section 8.1(f),
to close the transactions contemplated hereby, excluding, however, the portion
of the Real Property so damaged with a corresponding reduction in the Purchase
Price equal to the Value of such Real Property so excluded. If under the
circumstances described in the foregoing sentence, BAC shall elect to consummate
the transactions provided for herein, Sellers shall, on demand, pay to BAC
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the full amount of any insurance proceeds received by Sellers or any Advantica
Affiliate in respect of any such loss, together with any deductible or
co-insurance reserve applicable to such loss.
5.16 FURTHER ASSURANCES. At any time after the Closing Date, Sellers
and BAC shall, and BAC shall cause the Quincy's Entities to, promptly execute,
acknowledge and deliver any other assurances or documents reasonably requested
by BAC or Sellers, as the case may be, and necessary for BAC or Sellers, as the
case may be, to satisfy its obligations hereunder or to obtain the benefits
contemplated hereby.
5.17 SRT ACKNOWLEDGMENT. On or before the Closing Date, BAC shall
execute and deliver to Sellers a written confirmation, substantially in the form
set forth in EXHIBIT 5.17, that neither BAC nor the Quincy's Entities have any
right, title or interest in, to or under certain Defeasance Eligible Investments
or any other Borrower Collateral (each as defined in documents governing the
Secured Restaurants Trust mortgage pool) transferred to and pledged by another
subsidiary of Spartan in connection with the release of the assets of Quincy's
from the Secured Restaurants Trust mortgage pool.
5.18 SUPPLEMENTAL DISCLOSURE. Sellers shall have the right and the
continuing obligation up to and including the Closing Date to supplement
promptly or amend the Disclosure Schedule with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or listed in the Disclosure Schedule;
provided, however, that BAC may unilaterally extend the Closing Date if
necessary to allow BAC three (3) business days to review any material
supplements or amendments to the Disclosure Schedule prior to the Closing Date.
If, in Purchaser's reasonable determination, any such supplement or amendment to
the Disclosure Schedule reveals a Quincy's Material Adverse Effect, BAC may
terminate this Agreement pursuant to Section 8.1.
ARTICLE 5A
TAX MATTERS
SECTION 5A.1. COOPERATION.
(a) Sellers and BAC agree that it is their mutual intention that the
purchase and sale of the Shares shall be treated for federal income tax
purposes, as well as for all relevant state, local and foreign income Tax
purposes, as a purchase and sale of the assets of the Quincy's Entities.
Advantica and BAC shall jointly make timely Section 338(h)(10) Elections with
respect to each of the Quincy's Entities in accordance with Section 338(h)(10)
of the Code and accompanying Treasury Regulations and any corresponding
elections under state, local and foreign Tax law where applicable (the "Section
338(h)(10) Elections") with respect to the purchase and sale of the Shares and
with respect to the deemed purchase and sale of the assets of the Quincy's
Entities. The Sellers represent that its sale of the Shares is eligible for, and
BAC represents that it is qualified to make, such elections. The Sellers and the
Quincy's Entities shall report, for federal income tax purposes (and for state,
local and foreign income tax purposes
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where permitted by applicable law), the transaction under this Agreement
consistent with the Section 338(h)(10) Elections; and none of the Sellers, the
Quincy's Entities or BAC will take a position under the Code contrary thereto in
any Tax Return or in any discussion with or any proceeding before any Taxing
Authority or other governmental body or otherwise, unless required to do so by
applicable Tax laws pursuant to a determination as defined in Section 1313(a) of
the Code. Except for the purchase of Shares, the Section 338(h)(10) Elections,
the sales or conversions described in Section 1.4(b), the transfer of Excluded
Assets or the purchase of the Advantica Intellectual Property, BAC shall not
cause or permit the Quincy's Entities to engage after the Closing, on the
Closing Date, in any transaction outside the ordinary course of business that
affects the Taxes of the Quincy's Entities.
(b) Buyer and Seller agree to the allocation of the Purchase Price, as
adjusted, as follows: (i) one million dollars ($1,000,000) to the Advantica
Intellectual Property acquired, (ii) two million five hundred thousand dollars
($2,500,000) to the Transition Services Agreement, (iii) that number of dollars
equal to the value of the current assets as shown on Schedule A, and (iv) any
remaining dollars to the Operating Property or Real Property acquired.
Advantica's consolidated federal income Tax Return (and where permitted by law,
all state, local and foreign income Tax Returns of Advantica, Spartan or any
Advantica Entity other than the Quincy's Entities for such jurisdictions that
compute Tax on a combined, consolidated or similar basis) and all filings for
which BAC is responsible under paragraph (c) below shall be consistent with and,
when required to do so , reflect the allocation set forth in this paragraph (b).
(c) Notwithstanding anything to the contrary contained herein, Sellers
and BAC agree to take, and cooperate with each other to take, all actions
necessary or appropriate (including without limitation, the preparation,
completion and timely joint filing by Advantica and BAC of Form 8023 and the
preparation, completion and timely filing of such other forms, returns,
elections, schedules and other documents, information and instruments (the
"Forms")) to properly effect and preserve the Section 338(h)(10) Elections and
to treat the transaction as a sale of assets as opposed to a sale of the Shares
for income, franchise and similar tax purposes. Sellers and BAC shall take such
action and file all such Forms in a timely manner and shall provide assurance to
the other party that it has done so. BAC shall be responsible for the actual
preparation and timely filing of all Forms required to be submitted to the IRS
(and, where applicable, all state, local and foreign Taxing Authorities) in
connection with properly effecting and preserving the Section 338(h)(10)
Elections in accordance with the Code (or similar provisions of state, local or
foreign law) and the terms of this Agreement, which Forms shall reflect the
allocation set forth in Section 5A.1(b). If any changes are required to these
Forms subsequent to their filing, the parties shall promptly agree and cooperate
with respect to such changes. To the extent not executed and completed as of the
date hereof, Sellers shall execute and deliver to BAC such Forms, including any
amended or replacement Forms 8023, as are reasonably requested by BAC or as are
required by the Code, or under similar provisions of state, local or foreign law
at least twenty (20) days prior to the date such Forms are required to be filed.
Sellers shall provide BAC with such information as BAC reasonably requests in
order to prepare any Forms within thirty (30) days of BAC's request for such
information or within such shorter period as is necessary to comply with
applicable law. Notwithstanding the foregoing, BAC shall
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request any such information as promptly as practicable following the final
determination of the Working Capital Adjustment under Section 1.7 and Sellers
shall provide such information as promptly as practicable following request
therefor.
(d) In no event shall the Quincy's Entities or BAC have any Liability
directly or indirectly (pursuant to a tax sharing agreement or otherwise) for
state, local or foreign income, franchise or similar taxes (including interest
and penalties thereto) resulting from the Section 338(h)(10) Elections, or from
an election or deemed election under Section 338(g) of the Code (or similar
state, local or foreign provision) with respect to the purchase and sale of the
Shares hereunder and the deemed purchase and sale of the assets of Quincy's
Restaurants, Inc. and Quincy's Realty, Inc., including liabilities resulting
from state, local or foreign income, franchise or similar tax jurisdictions that
do not provide or recognize the Section 338(h)(10) Elections or do not apply
their respective provisions corresponding to Section 338(h)(10) of the Code to
the purchase and sale of Shares or the deemed purchase and sale of the assets of
Quincy's Restaurants, Inc. and Quincy's Realty, Inc., (for example, because the
Quincy's Entities file a separate company income Tax Return in such
jurisdiction), and any such Liability shall be paid by Advantica and Spartan.
(e) BAC recognizes that the Quincy's Entities have joined with Spartan,
Advantica, and the other Advantica's Entities in filing consolidated, combined
or similar Tax returns when permitted or required. After the Closing Date, (i)
notwithstanding any tax sharing or similar agreement, Advantica shall and shall
cause the members of the Retained Group to include (to the extent permitted or
required by Law) the taxable income or loss, and all other items, of the
Quincy's Entities for periods ending before or on the Closing Date (or any
portion thereof up through and including the Closing Date), in their
consolidated, combined or similar Tax Returns, including without limitation
income and loss attributable to the Section 338(h)(10) Elections, the sale of
the Advantica Intellectual Property, the sales or conversions described in
Section 1.4(b), or the disposition of the Excluded Assets, and (ii) in the case
of those jurisdictions that require or permit a Tax Return not described in (i)
and that permit or require a short period Tax Return ending on the Closing Date,
Advantica and the Quincy's Entities and other Advantica Entities shall include
the taxable income or loss, and all other items, of the Quincy's Entities for
periods ending before or on the Closing Date, on such Tax Returns, including
without limitation income and loss attributable to Section 338(h)(10) Elections,
the sale of the Advantica Intellectual Property, the sales or conversions
described in Section 1.4(b), or the disposition of the Excluded Assets.
(f) With respect to any other Tax Returns for any taxable period that
includes but does not end on the Closing Date (the "Straddle Tax Return"),
Advantica shall in consultation with BAC prepare a schedule setting forth the
taxable income or loss, Taxes collected from third parties (such as withholding
and sales and use Taxes), and all other items of the Quincy's Entities, for the
period commencing with the first day of the taxable period covered by such
Straddle Tax Return up to and including the Closing Date ("Pre-Closing Period")
and the period commencing with the first day after the Closing Date and ending
with the last day of the taxable
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period covered by such Straddle Tax Return (the "Post-Closing Period"). The
income and loss or other items of the Quincy's Entities will be allocated to the
Pre-Closing Period, to the extent practicable by closing the books as of the end
of the Closing Date. To the extent an allocation in accordance with the
provision of the foregoing sentence is not practicable, such taxable income and
loss or other items shall be allocated on the basis of the number of days (other
than any items specifically allocable to the Pre-Closing Period or Post-Closing
Period) in the Pre-Closing Period compared to the number of days in the entire
taxable period covered by such Straddle Tax Return. Except with respect to the
Excluded Assets and any real property sold by any Quincy's Entity prior to the
date of this Agreement, all ad valorem and real and personal property taxes
relating to real and personal property of the Quincy's Entities (including 1998)
shall be borne by BAC.
(g) Advantica shall (or shall cause the members of the Retained Group
to) pay, and in no event shall BAC or the Quincy's Entities pay directly or
indirectly (pursuant to a tax sharing agreement or otherwise) or be obligated to
pay or have any Liability for, any Taxes described in Section 5A.1(d) or any
Taxes attributable to the amounts described in Section 5A.1(e), including,
without limitation, any Tax Liability attributable to the Section 338(h)(10)
Elections, the disposition of the Excluded Assets, the sale of the Advantica
Intellectual Property, the sales or conversions described in Section 1.4(b), or
any Taxes attributable to the business or activities of the Quincy's Entities
prior to or on the Closing Date. In the case of the Straddle Tax Returns, upon
notice from BAC, Advantica or Spartan shall pay BAC an amount which reflects the
Taxes attributable to the income, operations and properties of the Quincy's
Entities for the Pre-Closing Period, including, without limitation, any Tax
Liability attributable to the Section 338(h)(10) Elections, the sale of the
Advantica Intellectual Property, the sales or conversions described in Section
1.4(b), or the disposition of the Excluded Assets. Advantica shall pay BAC or
the Taxing Authority directly the Taxes which are payable with such Tax Returns
within three (3) Business Days prior to the date for the filing of such Tax
Returns. If Advantica pays any such Taxes directly to a Taxing Authority
pursuant to this Section 5A.1(g), Advantica shall provide BAC with proof of such
payment within 30 days of payment.
(h) Advantica shall be responsible for, and shall have ultimate
discretion with respect to, (i) the preparation and filing of all Tax Returns
required or permitted by applicable Law to be filed by the Quincy's Entities (or
by Advantica or its Affiliates on their behalf) with respect to taxable years
(including short taxable years) that end on or before the Closing Date (and the
payment of all Taxes reported on such Tax Returns), and (ii) representation and
responsibility for any Tax Audit, including the execution of any waiver of
limitation with respect to any Tax Audit, relating to any such Tax Returns but
excluding any Tax Audit relating to ad valorem, real and personal property Taxes
in connection with all real estate and personal property acquired by BAC;
provided, however, that all Straddle Tax Returns shall be prepared in a manner
consistent with past practices and insofar as is relevant to the Quincy's
Entities, BAC shall have the right to review any such Straddle Tax Return at
least three (3) days prior to filing and Advantica shall inform BAC as to any
trust fund tax matter that is reasonably likely to have an adverse affect on the
Quincy's Entities for periods (or portions thereof) beginning after the Closing
Date, provided, further, that insofar as is relevant to the Quincy's Entities,
no such Tax Audit, excluding the
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currently pending Florida sales tax audit and income, or similar Tax Audit,
shall be settled or otherwise concluded (or any waiver signed) without the
consent of BAC (which shall not be unreasonably withheld or delayed) to the
extent such settlement is reasonably likely to have an adverse affect on the
Quincy's Entities for the period (or portions thereof) beginning after the
Closing Date. BAC will timely execute all powers of attorney reasonably
requested by Advantica to allow Advantica or its affiliates to represent the
Quincy's Entities on all matters pertaining to Taxes for the Pre-Closing
Periods.
(i) BAC and the Quincy's Entities shall be responsible for, and shall
have ultimate discretion with respect to, (i) the preparation and filing of all
Tax Returns required to be filed by the Quincy's Entities with respect to
periods that begin after the Closing Date (and the payment of all Taxes reported
on any such Tax Return), and (ii) the preparation and filing of the Straddle Tax
Returns, if any, and (iii) any Tax Audit (including the execution of any waiver
of limitation with respect to any Tax Audit) relating to any such Tax Returns;
provided, however, that in the case of any Straddle Tax Return, the preparation
and filing of such Tax Return shall be subject to the review of Advantica at
least three (3) days prior to filing and, with respect to the Pre-Closing Period
portion of such returns, approval of Advantica (which approval shall not be
unreasonably withheld or delayed), and (iv) filing all employment Tax Returns of
the Quincy's Entities including but not limited to IRS forms 940, 941, W-2 and
W-3 and all similar state and local employment Tax Returns for the calendar year
ended 1998 including activity required to be reported for the Pre-Closing Period
(exclusive of any quarterly state unemployment or similar Tax reports for the
Pre-Closing Period) and (v) filing all information reporting Tax Returns of the
Quincy's Entities including but not limited to IRS forms 1096 and 1099 and all
similar state and local information returns for the calendar year ended 1998
including activity required to be reported for the Pre-Closing Period and (vi)
all filing, payments and Tax Audits relating to ad valorem, real and personal
property taxes relating to all real estate and personal property of the Quincy's
Entities (other than the Excluded Assets and any real property sold by any
Quincy's Entity prior to the date of this Agreement); provided, however, that
Advantica shall and shall cause the Advantica Entities (other than the Quincy's
Entities) to provide information and assistance as is reasonably necessary for
BAC to timely file (or cause the Quincy's Entities to timely file) the items
described in this Section 5A.1(i), including but not limited to work papers and
all other information required to file the applicable returns and BAC shall
inform Advantica as to any trust fund Tax matter that is reasonably likely to
have an adverse affect on the Advantica and the Quincy's Entities for periods
prior to the Closing Date, provided, further, that, insofar as is relevant to
the Quincy's Entities, no Tax Audit or other controversy shall be settled or
otherwise concluded without the consent of Advantica (which shall not be
unreasonably withheld or delayed) to the extent such settlement is reasonably
likely to have an adverse affect on the Quincy's Entities for periods prior to
the Closing Date.
(j) Advantica and Spartan shall be jointly and severally liable for and
shall jointly and severally indemnify, defend and hold harmless BAC and the
Quincy's Entities, and each of them, from and against any Liability of the
Quincy's Entities (i) pursuant to Treasury Regulation Section 1.1502-6(a) or any
similar provision existing under the Laws of any state with respect to
consolidated, combined or similar returns, (ii) as transferee or successor,
(iii) by contract, or (iv)
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otherwise, in each case for the Taxes of any person or entity arising for any
taxable year or period ending on or prior to the Closing Date (or any portion
thereof up through and including the Closing Date). Advantica and Spartan shall
be jointly and severally liable for and shall jointly and severally indemnify,
defend and hold harmless BAC and the Quincy's Entities, and each of them, from
and against any and all Taxes of the Quincy's Entites which are attributable to
any period ending on or before the Closing Date (or portion thereof up through
and including the Closing Date), including but not limited to any Taxes
attributable to the Section 338(h)(10) Elections, the sale of the Advantica
Intellectual Property, the sales or conversions described in Section 1.4(b), or
the disposition of the Excluded Assets. In addition, Advantica and Spartan shall
be jointly and severally liable for and shall jointly and severally indemnify,
defend and hold harmless BAC and the Quincy's Entities, and each of them, from
and against any Liability for Taxes of the Advantica Entities (or their
Affiliates) for the same periods or portions thereof described in the previous
sentence. Advantica and Spartan shall also be jointly and severally liable for
and shall jointly and severally indemnify and hold harmless BAC and the Quincy's
Entities, and each of them, from and against all Losses, incurred by them in
connection with any Liability to, or claim by, any Taxing Authority, for Taxes
for which Advantica and Spartan are required to indemnify BAC or the Quincy's
Entities under this Article 5A. For purposes of the foregoing, any amounts paid
to BAC or the Quincy's Entities or their respective Affiliates shall be treated
as an adjustment to the Purchase Price of the Shares. Advantica and Spartan
shall be entitled to any refunds of Taxes of Advantica (or its Affiliates) or
the Quincy's Entities for the periods described in Section 5A.1(e). BAC shall
deliver any such refund check to Advantica within ten (10) Business Days after
receipt.
(k) BAC and the Quincy's Entities shall be liable for and indemnify the
Sellers against all Taxes imposed on the Quincy's Entities (or for which the
Quincy's Entities may otherwise be liable) where such Taxes are attributable to
any taxable year or period that begins after the Closing Date or are
attributable to that portion of a Straddle Tax Return relating to the
Post-Closing Period, or any Taxes imposed on any Advantica Entity due to BAC
causing or permitting the Quincy's Entities to engage after the Closing, on the
Closing Date, in any transaction outside the ordinary course of business in
violation of BAC's covenant against such action set forth in Section 5A.1(a) of
this Agreement. BAC shall also indemnify and hold harmless the Sellers from and
against all costs and expenses incurred by the Sellers (including reasonable
attorneys' fees and expenses) in connection with any Liability to, or claim by,
any Taxing Authority, for Taxes for which BAC and the Quincy's Entities are
required to indemnify the Sellers under this Article 5A.
(l) BAC and Advantica shall consult prior to filing their Tax Returns
with respect to 1998 and shall agree on the inclusion of items of income and
deduction and all other items consistent with Section 5A.1(e) and (f) pursuant
to the permanent books and records of the Quincy's Entities so as to avoid
double inclusion or double exclusion of income and deductions and all other
items. In the event that BAC and Advantica are unable to agree on the allocation
of such items, then the items of disagreement shall be referred promptly to KPMG
Peat Marwick. KPMG Peat Marwick shall settle the items of disagreement within
ten (10) days and the decision of KPMG Peat Marwick shall be conclusive on the
parties with respect to the items of dispute.
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The fees and expenses payable to KPMG Peat Marwick with respect to these
determinations shall be borne equally by Spartan and BAC.
(m) After the Closing Date, each of BAC, the Quincy's Entities,
Advantica, and Spartan shall and Advantica shall cause each member of the
Retained Group to (i) provide, or cause to be provided, to each other's
respective officers, employees, representatives and Affiliates, such assistance
as may reasonably be requested, including making available employees and the
books and records of the Quincy's Entities or any of the members of the Retained
Group, by any of them in connection with the preparation of any Tax Return or
any Tax Audit of the Quincy's Entities or the members of the Retained Group, in
respect of which any party is responsible pursuant to Section 5A.1, and (ii)
retain, or cause to be retained, for so long as any such taxable years or Tax
Audits shall remain open for adjustments, any records or information which may
be relevant to any such Tax Returns or Tax Audits. Reasonable costs associated
with the assistance described in (i) shall be borne by the requesting party.
(n) Each of BAC, the Quincy's Entities, Advantica, and Spartan shall
and Advantica shall cause each member of the Retained Group to promptly inform,
keep regularly apprised of the progress with respect to, and notify the other
party in writing not later than (i) ten (10) Business Days after the receipt of
any notice of any Tax Audit or (ii) fifteen (15) Business Days prior to the
settlement or final determination of any Tax Audit for which it was responsible
pursuant to Section 5A.1 which is reasonably likely to affect the Taxes of such
other party for any taxable year. .The Failure to timely notify the other party
as provided herein shall not relieve the indemnifying party of any Liability
that it may have with respect to any such Taxes, including ad valorem, real and
personal property taxes related to all real estate and personal property
acquired by BAC, except to the extent the indemnified party may be prejudiced
with respect to such failure. Any dispute arising pursuant to this Section
5A.1(n) shall be resolved by arbitration in the same manner that disputes are
resolved under Section 7.10 of this Agreement.
(o) All transfer Taxes which may be imposed or assessed as a result of
the purchase of Shares, Section 338(h)(10) Elections, the sales or conversions
described in Section 1.4(b), purchase of the Advantica Intellectual Property and
the transfer of the Excluded Assets, if any, shall be borne by Advantica or
Spartan.
(p) Each of the Sellersand, BAC agree to cooperate and to share, and
cause the Quincy's Entities to share, all Tax information materials, including
information relating to ad valorem, real and personal property taxes, reasonably
necessary to the other in connection with all Tax compliance matters.
(q) BAC or the Quincy's Entities will reimburse Advantica for any
franchise Taxes paid to Alabama, Georgia, Mississippi, North Carolina, Ohio and
South Carolina which is paid by Advantica during 1998 or paid upon subsequent
Tax Audit related to the 1998 Tax year with the Quincy's Entities Tax Returns,
to the extent the tax is paid solely for the privilege of conducting business
for the Post-Closing Period and for any other similar Taxes, but in each case
only if such prepayment is not reflected in the Final Closing Date Working
Capital.
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(r) Advantica and Spartan shall (or shall cause each member of the
Retained Group to) retain all original Tax Returns and Tax Return supporting
documentation for the Tax Returns filed for the periods ending prior to the
Closing Date for which Advantica or any member of the Retained Group has
responsibility for payments or refunds under this Article 5A. Advantica and
Spartan shall (or shall cause each member of the Retained Group to) retain all
original invoices, fixed asset records, computer tapes, microfiche, computer
optional records or any other media used to store or record information which
may be required in connection with a Tax Audit of the Quincy's Entities' Tax
Returns or Taxes for periods ending prior to the Closing Date. Any books or
records not retained by Advantica or Spartan will be subject to the retention
and availability provisions described in Section 5.10 of this Agreement. Upon
request of BAC and at BAC's expense, Advantica will make available to BAC and
will make and deliver copies of any books and records or other documents to be
retained by the members of the Retained Group pursuant to this Section 5A.1(s).
(s) Notwithstanding anything contained in Section 5A.1(h) to the
contrary, if BAC desires to participate in, but not control, any such defense,
compromise and settlement of a Tax Audit described in Section 5A.1(h)(ii), it
may do so at its sole cost and expense. If, however, Advantica fails or refuses
to undertake the defense of such Tax Audit within thirty (30) days after written
notice of such claim has been given to Advantica, BAC shall have the right to
undertake the defense, compromise and settlement of such claim with counsel of
its own choosing and Advantica shall (and shall cause any member of the Retained
Group to) timely execute any powers of attorney reasonably requested by BAC to
allow BAC to represent the Quincy's Entities on all matters in connection with
such Tax Audits. No settlement of such a Tax Audit shall be made without the
prior written consent by or on behalf of Advantica, which consent shall not be
unreasonably withheld or delayed. Consent shall be presumed in the case of
settlements of $20,000 or less where Advantica has not responded within five
business days of notice of a settlement.
(t) Spartan shall furnish Buyer on or before the Closing Date an
affidavit, stating, under penalty of perjury, Spartan's United States employer
identification number and that Spartan is not a foreign person pursuant to
Section 1445 of the Code.
SECTION 5A.2 TAX RELATED AGREEMENTS.
(a) Effective as of the Closing Date, the Quincy's Entities shall not
have any obligation or Liability in respect of any Tax sharing, Tax allocation
or similar agreement between any of the Quincy's Entities, on the one hand, and
any member of the Retained Group on the other hand.
(b) Any and all Tax sharing agreements, overhead allocation agreements,
cost reimbursement agreements and other intercompany agreements between any of
the Quincy's Entities on the one hand, and Advantica or any member of the
Retained Group, on the other hand, entered into on or prior to the Closing Date
shall be terminated and of no effect with
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respect to the Quincy's Entities as of the Closing Date and there will be no Tax
or other payment made (or obligation fulfilled) after the Closing Date which
relates to any periods during which any such agreements were in effect from the
Quincy's Entities to Advantica or any member of the Retained Group or from
Advantica or any member of the Retained Group to the Quincy's Entities.
Advantica shall cause all of the members of the Retained Group to comply with
this Section 5A.2.
(c) For purposes of this Section 5A.2, the term "Tax" shall include ad
valorem, real and personal property taxes.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each Party to perform this Agreement and consummate the Stock Purchase and
the other transactions contemplated hereby are subject to the satisfaction of
the following conditions, unless waived by both Parties pursuant to Section 9.6.
(A) REGULATORY APPROVALS. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for consummation
of the Stock Purchase shall have been obtained or made and shall be in full
force and effect and all waiting periods required by Law shall have expired.
(B) CONSENTS AND APPROVALS. Each Party shall have obtained any and all
Consents required for consummation of the Stock Purchase or for the preventing
of any Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to have, individually or in the aggregate, a
Quincy's Material Adverse Effect or a BAC Material Adverse Effect, as
applicable. Failure to obtain consent under (i) the Purchasing Agreement with
Simeus Foods International, Inc. dated September 27, 1996 or (ii) the Advantica
Credit Agreement shall constitute a Quincy's Material Adverse Effect and a BAC
Material Adverse Effect. Additionally, Sellers shall have complied with any and
all options, repurchase agreements, and rights of first refusal relating to the
Real Property such that all applicable rights of third parties thereunder have
either expired, lapsed or been waived.
(C) LEGAL PROCEEDINGS. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law or Order (whether temporary, preliminary or permanent) or taken
any other action which prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement or seeks to enjoin the operation of
all or a material portion of the Business or the Assets.
(D) BAC FINANCING. BAC shall have secured necessary financing on terms
that are in accordance with commitments received by it and as disclosed to
Advantica on or prior to the
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date hereof (or on terms that are, in the reasonable judgment of the Board of
Directors of BAC, more advantageous to BAC and its stockholders) to permit it to
satisfy its obligations to make required cash payments to Spartan as provided in
this Agreement.
6.2 CONDITIONS TO OBLIGATIONS OF BAC. The obligations of BAC to perform
this Agreement and consummate the Stock Purchase and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by BAC pursuant to Section 9.6(a):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
6.2(a), the accuracy of the representations and warranties of Sellers set forth
in this Agreement shall be assessed as of the date of this Agreement and as of
the Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Section 2.4 shall be true and correct (except for inaccuracies which are de
minimus in amount). There shall not exist inaccuracies in the representations
and warranties of Sellers set forth in this Agreement (including the
representations and warranties set forth in Section 2.4) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a Quincy's
Material Adverse Effect.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Quincy's and Spartan to be performed and complied
with pursuant to this Agreement prior to the Closing Date shall have been duly
performed and complied with in all material respects.
(C) CERTIFICATES. Each of the Sellers shall have delivered to BAC a
certificate, dated as of the Closing Date, to the effect that the conditions set
forth in Section 6.1 as relates to the Sellers or Quincy's and in Section 6.2(a)
and 6.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by Quincy's Board of Directors and stockholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby.
(D) OPINION OF COUNSEL. BAC shall have received an opinion of Parker,
Poe, Adams & Bernstein L.L.P., counsel to Spartan and Advantica, dated as of the
Closing Date, which shall be in a form mutually agreeable to Parker, Poe, Adams
& Bernstein L.L.P. and Alston & Bird LLP.
(E) MORTGAGE POOL RELEASE. All Assets of the Quincy's Entities shall
have been released from the Secured Restaurants Trust mortgage pool.
(F) SATISFACTION OF TITLE OBJECTIONS AND RELEASE OF CERTAIN LIENS.
Sellers shall have satisfied BAC's title objections to the extent required under
Section 1.8.
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(G) TRANSITION SERVICES AGREEMENT. BAC shall have received the
Transition Services Agreement, duly executed by Sellers and the appropriate
Advantica Affiliates.
6.3 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of Sellers to
perform this Agreement and consummate the Stock Purchase and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Sellers pursuant to Section 9.6(b):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
6.3(a), the accuracy of the representations and warranties of BAC set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). There shall not exist inaccuracies in the
representations and warranties of BAC set forth in this Agreement such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
BAC Material Adverse Effect; provided that, for purposes of this sentence only,
those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of BAC to be performed and complied with pursuant to
this Agreement prior to the Closing Date shall have been duly performed and
complied with in all material respects.
(C) CERTIFICATES. BAC shall have delivered to Quincy's (i) a
certificate, dated as of the Closing Date and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 6.1 as relates to BAC and in Section 6.3(a) and
6.3(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by BAC's Board of Directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby.
(D) OPINION OF COUNSEL. Spartan and Advantica shall have received an
opinion of Alston & Bird LLP, counsel to BAC, dated as of the Closing Date,
which shall be in a form mutually agreeable to Alston & Bird LLP and Parker,
Poe, Adams & Bernstein L.L.P.
(E) TRANSITION SERVICES AGREEMENT. Sellers shall have received the
Transition Services Agreement, duly executed by BAC.
ARTICLE 7
INDEMNIFICATION
7.1 AGREEMENT OF INDEMNITORS TO INDEMNIFY.
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(a) Subject to the terms and conditions of this Article 7 and in
addition to the indemnification provided in Section 5A.1(j), the Sellers jointly
and severally agree to indemnify, defend, and hold harmless BAC and the Quincy's
Entities, and each of them, from, against, for and in respect of any and all
Losses asserted against, or paid, suffered or incurred by, BAC or any Quincy's
Entity and resulting from, based upon, or arising out of:
(i) the inaccuracy or breach of any representation or warranty
of Sellers contained in this Agreement, and for purposes of this Section
7.1(a)(i) any qualification of such representations and warranties (other than
in Sections 2.7 and 2.8) by reference to the materiality of matters stated
therein or as to matters having or not having a "Material Adverse Effect," shall
be disregarded, in determining any inaccuracy, untruth, incompleteness or breach
thereof,
(ii) a breach of or failure to perform any obligation,
covenant or agreement of any Seller made in this Agreement;
(iii) the Excluded Assets; and
(iv) the Excluded Liabilities.
(b) Subject to the terms and conditions of this Article 7 and in
addition to the indemnification provided in Section 5A.1(k), BAC agrees to
indemnify, defend, and hold harmless and shall cause each Quincy's Entity to
indemnify, defend and hold harmless the Sellers, and each of them, from,
against, for and in respect of any and all Losses asserted against, or paid,
suffered or incurred by, any Seller and resulting from, based upon, or arising
out of:
(i) the inaccuracy or breach of any representation or warranty
of BAC contained in this Agreement and for purposes of this Section 7.1(b)(i)
any qualification of such representations and warranties by reference to the
materiality of matters stated therein or as to matters having or not having a
"Material Adverse Effect," shall be disregarded, in determining any inaccuracy,
untruth, incompleteness or breach thereof; and
(ii) a breach of or failure to perform any covenant or
agreement of BAC made in this Agreement.
7.2 PROCEDURES FOR INDEMNIFICATION.
(a) An Indemnification Claim shall be made by an Indemnitee by delivery
of a written notice to the Indemnitor Representative requesting indemnification
and specifying the basis on which indemnification is sought and the amount of
asserted Losses and, in the case of an Indemnification Claim in respect of
Losses resulting from, based upon, or arising out of a claim asserted by any
person or entity not a Party, but not including any claim for indemnification
under Section 5.A.1(j) or (k) (a "Third Party Claim"), containing (by attachment
or otherwise) such other information as such Indemnitee shall have concerning
such Third Party Claim.
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(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 7.3 shall be observed by the Indemnitee and the
Indemnitor Representative.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor Representative shall have 45 days to object to such
Indemnification Claim by delivery of a written notice of such objection to such
Indemnitee specifying in reasonable detail the basis for such objection. Failure
to timely so object shall constitute a final and binding acceptance of the
Indemnification Claim by the Indemnitor Representative on behalf of all
Indemnitors, and the Indemnification Claim shall be paid in accordance with
subsection (d) hereof. If an objection is timely interposed by the Indemnitor
Representative and the dispute is not resolved by such Indemnitee and the
Indemnitor Representative within 30 days from the date the Indemnitee receives
such objection, such dispute shall be resolved by arbitration as provided in
Section 7.10.
(d) Upon determination of the amount, if any, of an Indemnification
Claim against which Indemnitors are obligated to indemnify Indemnitees under
this Agreement, whether by agreement between the Indemnitor Representative and
the Indemnitee or by an arbitration award or by any other final adjudication,
the Indemnitors shall pay the amount of such established Indemnification Claim
within ten days of the date such amount is determined.
7.3 THIRD PARTY CLAIMS. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Indemnitor Representative written
notice of a Third Party Claim promptly after receipt by the Indemnitee of notice
thereof, and the Indemnitor Representative, on behalf of the Indemnitors, may
undertake the defense, compromise and settlement thereof by representatives of
its own choosing. The failure of the Indemnitee to notify the Indemnitor
Representative of such claim shall not relieve the Indemnitors of any liability
that they may have with respect to such claim except to the extent the
Indemnitors may be prejudiced by such failure. If the Indemnitee desires to
participate in, but not control, any such defense, compromise and settlement, it
may do so at its sole cost and expense. If, however, the Indemnitor
Representative fails or refuses to undertake the defense of such Third Party
Claim within thirty (30) days after written notice of such claim has been given
to the Indemnitor Representative by the Indemnitee, the Indemnitee shall have
the right to undertake the defense, compromise and settlement of such claim with
counsel of its own choosing. In the circumstances described in the preceding
sentence, the Indemnitee shall, promptly upon its assumption of the defense of
such claim, make an Indemnification Claim as specified in Section 7.2 which
shall be deemed an Indemnification Claim that is not a Third Party Claim for the
purposes of the procedures set forth herein.
(b) No settlement of a Third Party Claim involving the asserted
liability of the Indemnitors under this Article shall be made without the prior
written consent by or on behalf of the Indemnitor Representative, which consent
shall not be unreasonably withheld or delayed. Consent shall be presumed in the
case of settlements of $20,000 or less where the Indemnitor
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Representative has not responded within five business days of notice of a
proposed settlement. If the Indemnitor Representative assumes the defense of
such a Third Party Claim, (a) no compromise or settlement thereof may be
effected by the Indemnitor Representative without the Indemnitee's consent,
which consent shall not be unreasonably withheld or delayed, unless (i) there is
no finding or admission of any violation of law or any violation of the rights
of any person and no effect on any other claim that may be made against the
Indemnitee, (ii) the sole relief provided is monetary damages that are paid in
full by the Indemnitors, and (iii) the compromise or settlement includes, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnitee of a release, in form and substance satisfactory to the Indemnitee,
from all liability in respect of such Third Party Claim, and (b) the Indemnitee
shall have no liability with respect to any compromise or settlement thereof
effected without its consent unless the consent referenced in clause (a) above
was unreasonably withheld or delayed.
(c) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit participation
of counsel selected by any party hereto and, as may reasonably be related to any
such claim or action, shall provide access to the counsel, accountants and other
representatives of each party during normal business hours to all properties,
personnel, books, tax records, contracts, commitments and all other business
records of such other party and will furnish to such other party copies of all
such documents as may reasonably be requested (certified, if requested).
(d) Notwithstanding anything contained herein to the contrary, this
Section 7.3 shall not apply to any Indemnification Claim arising under Section
5A.1(j) or Section 5A.1(k).
7.4 INDEMNIFICATION EXCLUSIVE REMEDY. Absent fraud, if the Closing
occurs, except for remedies based upon fraud and except for equitable remedies
with respect to the covenant contained in Section 5.7(b), the remedies provided
in Article 5A and in this Article 7 constitute the sole and exclusive remedies
for recovery against a party to this Agreement based upon the inaccuracy or
breach of any representation or warranty of such party contained herein or in
any certificate, Schedule or Exhibit furnished by such party in connection
herewith, or based upon the failure of such party to perform any covenant,
agreement or undertaking required by the terms hereof to be performed by such
party.
7.5 SURVIVAL. Subject to Section 7.6 below, all representations,
warranties, obligations, covenants and agreements contained in this Agreement
shall survive the Closing.
7.6 TIME LIMITATIONS. The Indemnitors will have no liability to the
Indemnitees under or in connection with: (a) a breach of any of the
representations, warranties, covenants or agreements made or to be performed by
the Indemnitors contained in this Agreement (other than the representations and
warranties set forth in Sections 2.9, 2.12, and 2.15) unless written notice
asserting an Indemnification Claim based thereon is given to the Indemnitor
Representative prior to the later of (i) the first anniversary of the Closing
Date or (ii) the first anniversary of the date on which such covenant or
agreement is to be performed hereunder; (b) a breach of any
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representation, warranty, obligation, covenant or agreement made or to be
performed by the Indemnitors contained in this Agreement related to any Taxes
(including ad valorem, real and personal property taxes), including without
limitation, those representations, warranties, obligations, covenants and
agreements made by the Indemnitors in Section 2.9 or Article 5A, unless written
notice asserting an Indemnification Claim based thereon is given to the
Indemnitor Representative prior to the later of (i) the fifth (5th) day after
the date upon which the Liability to which any such claim may relate is barred
by all applicable statutes of limitation and (ii) the fifth (5th) day after the
date upon which any claim for refund or credit related to such claim is barred
by all applicable statues of limitation; (c) a breach of any representation,
warranty, covenant or agreement made or to be performed by the Indemnitors
contained in this Agreement related to any environmental matters or employee
benefit plans, including without limitation, those representations and
warranties made by the Indemnitors in Sections 2.12 and 2.15, unless written
notice asserting an Indemnification Claim based thereon is given to the
Indemnitor Representative prior to the second anniversary of the Closing Date.
7.7 LIMITATIONS AS TO AMOUNT.
(a) Sellers shall have no liability with respect to the matters
described in clauses (i) or (ii) of Section 7.1(a), and BAC shall have no
liability with respect to the matters described in clauses (i) or (ii) of
Section 7.1(b), with respect to any Loss unless such Loss exceeds $25,000;
provided, however, that Losses arising out of a single or related set of facts,
circumstances or events shall be aggregated for purposes of determining whether
the Losses exceed $25,000 and that in the event such Losses exceed $25,000, the
entire amount of the obligation shall be indemnifiable to the extent and as
provided in this Agreement.
(b) Sellers shall have no liability with respect to the matters
described in clauses (i) or (ii) of Section 7.1(a), and BAC shall have no
liability with respect to the matters described in clauses (i) or (ii) of
Section 7.1(b), until the total of all Losses with respect thereto exceeds
$1,000,000 and then only for the amount by which such Losses exceed $1,000,000.
Sellers shall have no liability with respect to the matters described clause
(iii) of Section 7.1(a) until the total of all Losses with respect thereto
exceeds $50,000 in which event Indemnitors shall be obligated to indemnify the
Indemnitees as provided in this Article 7 for all such Losses.
(c) Notwithstanding anything herein to the contrary, the provisions of
this Section 7.7 shall not apply with respect to any Indemnification Claim
asserted by BAC based upon (i) Section 5A.1; (ii) any Excluded Liability; (iii)
any breach of Section 9.2(c); or (iv) any breach by Sellers of their obligations
under Section 5.5.
(d) In no event shall the aggregate liability of the Indemnitors under
this Article 7 exceed the Purchase Price.
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(e) Notwithstanding anything herein to the contrary, the provisions of
this Section 7.7 shall not apply with respect to any Indemnification Claim
asserted by Sellers based upon Section 5A.1 or any breach by BAC of its
obligations under Section 5.5.
7.8 TAX EFFECT AND INSURANCE. The liability of the Indemnitors with
respect to any Indemnification Claim shall be reduced by the tax benefit
actually realized and any insurance proceeds received by the Indemnitees as a
result of any Losses upon which such Indemnification Claim is based, and shall
include any tax detriment actually suffered by the Indemnitees as a result of
such Losses or any payment of indemnification. The amount of any such tax
benefit or detriment shall be determined by taking into account the effect, if
any and to the extent determinable, of timing differences resulting from the
acceleration or deferral of items of gain or loss resulting from such Losses and
shall otherwise be determined so that payment by the Indemnitors of the
Indemnification Claim, as adjusted to give effect to any such tax benefit or
detriment, will make the Indemnitee as economically whole as is reasonably
practical with respect to the Losses upon which the Indemnification Claim is
based. Any dispute as to the amount of such tax benefit or detriment shall be
resolved by arbitration as provided in Section 7.10 of this Agreement.
7.9 SUBROGATION. To the extent of payment of any Indemnification Claim,
whether such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitors
shall be subrogated to the extent of such payment to the rights of the
Indemnitee against any person or entity with respect to the subject matter of
such Indemnification Claim or Third Party Claim.
7.10 ARBITRATION. All disputes arising under this Article 7 and Article
5A (other than claims in equity) shall be resolved by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at issue
and selected by the Indemnitor Representative and BAC in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in such place in Atlanta, Georgia as may be specified
by the arbitrator (or any place agreed to by the Indemnitor Representative, BAC
and the arbitrator). The decision of the arbitrator shall be final and binding
as to any matters submitted under this Article 7 and Article 5A; provided,
however, if necessary, such decision and satisfaction procedure may be enforced
by either the Indemnitor Representative or BAC in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. All costs and expenses incurred by a Party in connection with any
such arbitration proceeding (including reasonable attorneys fees) shall be borne
as determined and allocated by the arbitrator or, if no such allocation is made
by the arbitrator, such costs and expenses shall be borne equally by the
Indemnitors as one party and the Indemnitees as the other party.
SECTION 7.11 PURCHASE PRICE ADJUSTMENTS. Any payments pursuant to
Section 5A.1 or this Article 7 of this Agreement shall be treated as an
adjustment to the Purchase Price for all Tax purposes.
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ARTICLE 8
TERMINATION
8.1 TERMINATION. Notwithstanding any other provision of this Agreement,
this Agreement may be terminated and the Stock Purchase abandoned at any time
prior to the Closing Date:
(a) By mutual consent of BAC and Sellers; or
(b) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement)] in the event of a material breach by the other
Party of any representation or warranty contained in this Agreement which cannot
be or has not been cured within 30 days after the giving of written notice to
the breaching Party of such breach; or
(c) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach;
(d) By either Party in the event any Consent of any Regulatory
Authority required for consummation of the Stock Purchase and the other
transactions contemplated hereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is not
appealed within the time limit for appeal;
(e) By either Party in the event that the Stock Purchase shall not have
been consummated by June 30, 1998, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of this
Agreement by the Party electing to terminate pursuant to this Section 8.1(e);
(f) By Sellers in the event that the Purchase Price would otherwise be
reduced by any amount in excess of Four Million Dollars ($4,000,000) if the Real
Property which BAC indicates in writing to Sellers that it desires to exclude
from the transaction and consider as Excluded Assets pursuant to its rights
under Section 1.4(a) were so excluded and considered as Excluded Assets; or
(g) By Sellers at any time, provided that upon any termination pursuant
to this subparagraph (g), Sellers shall be liable to BAC pursuant to Section
9.2(c) hereof (unless such termination is based upon an attempted renegotiation
by BAC of the Cash Payment not expressly permitted by the terms hereof),
payments pursuant to which shall constitute liquidated damages and shall be
BAC's exclusive remedy in respect of such termination.
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8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
8.2 and Article 9 shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 8.1(b) or 8.1(c) shall not relieve the
breaching Party from Liability for an uncured breach of this Agreement prior to
such termination.
ARTICLE 9
MISCELLANEOUS
9.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"ADVANTICA" shall mean Advantica Restaurant Group, Inc., a Delaware
corporation.
"ADVANTICA CREDIT AGREEMENT" shall mean that certain Credit Agreement
dated as of January 7, 1998, by and among Advantica, as guarantor, Quincy's and
certain other indirect subsidiaries of Advantica as Borrowers, the Lenders named
therein, and The Chase Manhattan Bank, as administrative agent, as may be
amended from time to time.
"ADVANTICA ENTITIES" shall mean, collectively, Advantica and all
Advantica Subsidiaries.
"ADVANTICA REORGANIZATION" shall mean Advantica's reorganization
pursuant to Chapter 11 of the United States Bankruptcy Code.
"AFFILIATE" of a Person shall mean any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person.
"AGREEMENT" shall mean this Stock Purchase Agreement, including the
Disclosure Schedule and the Exhibits delivered pursuant hereto and incorporated
herein by reference.
"APPRAISAL" shall mean the appraisals and market valuations prepared by
Surplus Solutions in 1997, a copy of each of which has previously been provided
to BAC.
"ASSETS" of a Person shall mean all of the assets of such Person of
every kind.
"BAC" shall mean Buckley Acquisition Corporation, a Delaware
corporation.
"BAC ENTITIES" shall mean, collectively, BAC and all BAC Subsidiaries.
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"BAC MATERIAL ADVERSE EFFECT" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on the ability of BAC to perform its obligations under
this Agreement or to consummate the Stock Purchase or the other transactions
contemplated by this Agreement.
"BAC SUBSIDIARIES" shall mean the Subsidiaries of BAC, which shall
include any corporation or other organization acquired as a Subsidiary of BAC in
the future and held as a Subsidiary by BAC on the Closing Date.
"BUSINESS" shall mean the operation of family steak house restaurants
under the Quincy's brand name.
"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in New York, New York.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CLOSING DATE VALUE" shall mean the aggregate amount of Operating
Assets as of the Closing Date, minus the aggregate amount of Operating
Liabilities as of the Closing Date.
"CODE" shall mean the Internal Revenue Code.
"CONFIDENTIALITY AGREEMENT" shall mean that certain letter agreement
dated January 30, 1997, between BAC and Advantica
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, commitment,
contract, lease, or obligation that is binding on any Person.
"DEFAULT" shall mean any breach or violation of, or default under, any
Contract, Law, Order, or Permit.
"DISCLOSURE SCHEDULE" shall mean the disclosure schedule document
executed by the parties hereto as of the date hereof, as amended or supplemented
pursuant to Section 5.18.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of the environment (including surface water, ground water, land
surface, or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over pollution or protection of the
environment, including the Comprehensive Environmental Response Compensation and
Liability Act, as amended, 42 U.S.C. 9601 ET SEQ. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and
other Laws relating to
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emissions, discharges, releases, or threatened releases of any Hazardous
Material, relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of any Hazardous Material.
"EQUITY RIGHTS" shall mean all options, warrants, or other binding
obligations of any character whatsoever relating to the issuance or acquisition
of securities or rights convertible into or exchangeable for, shares of the
capital stock of or other equity interests in a Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXHIBITS" shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof, and may be referred to in this Agreement and any
other related instrument or document without being attached hereto.
"FINAL CLOSING DATE VALUE" means the Closing Date Value (i) as shown in
Advantica's calculation delivered pursuant to Section 1.6(a), if no notice of
disagreement with respect thereto is duly delivered pursuant to Section 1.6(b);
or (ii) if such a notice of disagreement is delivered, (A) as agreed by BAC
pursuant to Section 1.6(b) or (B) in the absence of such agreement, as shown in
the independent accountant's calculation delivered pursuant to Section 1. 6(c).
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
11 of the Hart-Scott-Rodino Antitrust Improvements Act of 1976. as amended, and
the rules and regulations promulgated thereunder.
"INDEMNIFICATION CLAIM" shall mean a claim for indemnification under
Articles 5A or 7.
"INDEMNITEE" shall mean any Person entitled to indemnification under
Articles 5A or 7.
"INDEMNITOR" shall mean any Party obligated to indemnify another Person
under Articles 5A or 7.
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"INDEMNITOR REPRESENTATIVE" shall mean Advantica in the case of any
Indemnification Claim asserted against any Seller, and BAC in the case of any
Indemnification Claim asserted against BAC.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises,
know-how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that are
actually known by the chairman, president, chief financial officer, chief
accounting officer, chief operating officer, general counsel, or any vice
president of such Person.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, rule, or statute binding on and applicable to a Person.
"LIABILITY" shall mean any liability, indebtedness, or obligation,
whether accrued, absolute or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, easement,
encroachment, encumbrance, lien, mortgage, pledge, security interest on, or with
respect to any property or property interest.
"LITIGATION" shall mean any arbitration, cause of action, complaint,
criminal prosecution, or governmental proceeding against a Party or affecting
the transactions contemplated by this Agreement.
"LOSSES" shall mean any and all losses, damages (excluding special and
consequential damages), Liabilities, costs, and expenses, including interest,
penalties, cost of investigation and defense, and reasonable attorneys' and
other professional fees and expenses.
"MATERIAL" OR "MATERIAL" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement shall
determine materiality in that and only in that instance.
"OPERATING ASSETS" shall mean, as of any date of determination, the
aggregate net book values of the assets of the Quincy's Entities reflected in
the items listed under the caption "Sample Calculation as of December 31, 1997"
set forth on SCHEDULE A (which net book values shall be determined on a basis
consistent with the same items set forth on SCHEDULE A); provided,
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however, that notwithstanding the foregoing, Operating Assets shall expressly
exclude all Excluded Assets.
"OPERATING LIABILITIES" shall mean, as of any date of determination,
the aggregate net book values of the liabilities of the Quincy's Entities
reflected in the items listed under the caption "Sample Calculation as of
December 31, 1997" set forth on SCHEDULE A (which net book values shall be
determined on a basis consistent with the same items set forth on SCHEDULE A);
provided, however, that notwithstanding the foregoing, Operating Liabilities
shall expressly exclude all Excluded Liabilities.
"OPERATING PROPERTY" shall mean any property owned, leased, or operated
by the Party in question or by any of its Subsidiaries and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any applicable and binding administrative decision
or award, decree, injunction, judgment, order, ruling, or writ of any federal,
state, local or foreign court, arbitrator, mediator, tribunal, administrative
agency, or Regulatory Authority
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"PARTY" shall mean any one of Spartan, Advantica and BAC, and "PARTIES"
shall mean Spartan, Advantica and BAC.
"PERMIT" shall mean any federal, state, local, or foreign governmental
approval, authorization, certificate, license or permit that is binding upon any
Person.
"PERMITTED ENCUMBRANCES" shall mean (i) any Lien related to Liabilities
(other than Excluded Liabilities) reflected in the Quincy's Financial
Statements; (ii) any Liens incurred or created since December 31, 1997 in the
ordinary course of business and which alone or in the aggregate, are not
reasonably likely to have a Quincy's Material Adverse Effect; (iii) any Liens
for Taxes (including ad valorem, real and personal property taxes), assessments
and other governmental charges not yet due and payable or due but not delinquent
or being contested in good faith by appropriate proceedings; (iv) any
mechanic's, workmen's, repairmen's, warehousemen's, carrier's or other like
Liens imposed by operation of law arising in the ordinary course of business
with respect to obligations not yet overdue for a period exceeding forty-five
days or being contested in good faith by appropriate proceedings; (v)
restrictions, easements, covenants, reservations, rights of way or other matters
of title to the Real Property or Leased Real Property (a) of record which are
revealed by the surveys delivered to the BAC or (b) which do not materially
affect the title to, or use of, such Real Property or Leased Real Property; (vi)
zoning ordinances, restrictions, prohibitions and other requirements imposed by
any governmental entity; (vii) rights of others in party walls, if any, relative
to the Real Property or
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Leased Real Property; (viii) deposits of cash or securities with third parties
to secure the performance of obligations other than Excluded Liabilities, (ix)
any unsatisfied title defects or encumbrances of the type referenced in clause
(ii) of the last sentence of Section 1.8(b), and (x) any other Liens which do
not materially impair the use of or title to the Assets subject to such Liens.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"POST-CLOSING PERIOD" shall have the meaning as set forth in Section
5A.1(f).
"PRE-CLOSING PERIOD" shall have the meaning as set forth in Section
5A.1(f).
"PRE-CLOSING PERIODS" shall mean taxable years ending on or prior to
the Closing Date and any portion of a period covered by a Straddle Tax Return
that ends on the Closing Date.
"QUINCY'S" shall mean Quincy's Restaurants, Inc., an Alabama
corporation.
"QUINCY'S COMMON STOCK" shall mean the $.01 par value common stock of
Quincy's.
"QUINCY'S ENTITIES" shall mean, collectively, Quincy's and all Quincy's
Subsidiaries.
"QUINCY'S FINANCIAL STATEMENTS" shall mean the consolidated balance
sheets (including related notes and schedules, if any) of Quincy's as of
December 31, 1997 and 1996, and the related statements of income, changes in
stockholders' equity, and cash flows (including related notes and schedules, if
any) for each of the two fiscal years ended December 31, 1997 and 1996.
"QUINCY'S MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of Quincy's and its Subsidiaries, taken as a
whole, or (ii) the ability of Sellers to perform their respective obligations
under this Agreement or to consummate the Stock Purchase or the other
transactions contemplated by this Agreement, provided that "Material Adverse
Effect" shall not be deemed to include the impact of (a) changes in Laws of
general applicability or interpretations thereof by courts or governmental
authorities, (b) changes in generally accepted accounting principles or
regulatory accounting principles, (c) actions and omissions of Quincy's (or any
of its Subsidiaries) or Advantica or Spartan taken with the prior written
Consent of BAC , and (d) the direct effects of compliance with this Agreement,
including expenses incurred by Quincy's in consummating the transactions
contemplated by this Agreement.
"QUINCY'S SUBSIDIARIES" shall mean the Subsidiaries of Quincy's, which
shall include the Quincy's Subsidiaries described in Section 2.5 and any
corporation or other organization
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acquired as a Subsidiary of Quincy's in the future and held as a Subsidiary by
Quincy's on the Closing Date.
"REAL PROPERTY" shall mean all real property, other than the Excluded
Real Property, owned by any Quincy's Entity, and all of Quincy's right, title
and interest in the buildings, fixtures, and improvements located thereon,
together with all of Quincy's right, title and interest in and to water lines,
rights of way, transferable licenses, easements, hereditaments, tenements, and
appurtenances belonging or appertaining thereto and any and all assignable
warranties of third parties with respect thereto.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the Federal
Trade Commission, the United States Department of Justice and all other federal,
state, county, local or other governmental or regulatory agencies, authorities
(including self-regulatory authorities), instrumentalities, commissions, boards
or bodies having jurisdiction over the Parties and their respective
Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.
"RESERVES" shall mean the reserves with respect to the items identified
on SCHEDULE A as account numbers 40550, 40598, 40597, 40616, 59941 and 59942,
respectively, as such reserves exist as of the Closing Date for purposes of
Section 1.6.
"RESTAURANT" shall mean a restaurant operated under the "Quincy's"
brand name.
"RETAINED GROUP" shall mean collectively Sellers and each Affiliate of
any of the Sellers other than and expressly excluding the Quincy's Entities.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SCHEDULE A" shall mean the unaudited consolidated balance sheet for
Quincy's and its Subsidiaries as of December 31, 1997 attached hereto as
Schedule A.
"SCHEDULE B" shall mean the list on which Value is stipulated by BAC
and the Sellers with respect to each parcel of Real Property.
"SECTION 338(H)(10) ELECTIONS" shall have the meaning as set forth in
Section 5A.1(a).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITIES LAWS" shall mean the Securities Act, the Securities
Exchange Act of 1934, as amended, the Investment Company Act of 1940, as
amended, the Investment Advisors Act of
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1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SELLERS" shall mean Spartan and Advantica.
"SPARTAN" shall mean Spartan Holdings, Inc., a New York corporation.
"STRADDLE TAX RETURN" shall have the meaning set forth in Section
5A.1(f).
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its parent
(provided, there shall not be included any such entity the equity securities of
which are owned or controlled in a fiduciary capacity), (ii) in the case of
partnerships, serves as a general partner, (iii) in the case of a limited
liability company, serves as a managing member, or (iv) otherwise has the
ability to elect a majority of the directors, trustees or managing members
thereof.
"TAX" or "TAXES" means federal, state, local or foreign taxes or
assessments, including but not limited to income, gross receipts, windfall or
excess profits, severance, production, sales, use, license, unclaimed property,
excise, franchise, employment, unemployment compensation, withholding, or other
taxes imposed or required to be withheld by the United States or any state,
county, local or foreign government or subdivision or agency thereof, including
any interest, penalties, and additions imposed thereon or with respect thereto.
Except as provided herein, "Tax" or "Taxes" specifically excludes ad valorem,
real and personal property taxes related to all real estate and personal
property acquired by BAC.
"TAX AUDIT" means any audit, assessment of taxes, reassessment of
taxes, or other examination by any Taxing Authority or any judicial or
administrative proceedings or appeal of such proceeding in respect of any Taxes
(including , real and personal property taxes) or Tax Returns.
"TAX LAW" means any statute, regulation, administrative rule, case
authority or other laws relating to Taxes, including ad valorem, real and
personal property taxes.
"TAX RETURN" shall means any return, filing, information statement or
other document required to be filed including, but not limited to, requests for
extension of time, filings made with estimated tax payments, claims for refund
and amended returns that may be filed, for any period with any Taxing Authority
in connection with any Tax or Taxes, including ad valorem, real and personal
property taxes related to all real estate and personal property acquired by
BAC).
"TAXING AUTHORITY" means any federal, state, local, municipal, foreign,
or other government or regulatory agency, authority, instrumentality,
commission, board or body having
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jurisdiction over the Parties to impose and collect any Tax, including ad
valorem real and personal property taxes.
"TREASURY REGULATIONS" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended (including corresponding provisions of succeeding regulations).
"VALUE" shall mean, with respect to any parcel of Real Property, the
amount reflected on Schedule B as the Purchase Price Adjustment Amount for such
parcel.
(b) The terms set forth below shall have the meanings ascribed thereto
in the referenced sections:
Advantica Intellectual Property Section 5.8
Advantica SEC Reports Section 2.6
Cash Payment Section 1.1
Closing Section 1.5
Closing Date Balance Sheet Section 1.6(a)
Disputed Amounts Section 1.6(c)
ERISA Affiliate Section 2.15(c)
Excluded Assets Section 1.2
Excluded Employees Section 5.7(a)(ii)
Excluded Liabilities Section 1.3
Excluded Real Property Section 1.2(a)
Field Employees Section 5.7(a)(i)
Forms Section 5A.1(c)
Hired Employees Section 5.7(a)
Leased Real Property Section 2.19(a)
New Plans Section 5.13(b)
Non-Field Employees Section 5.7(a)(ii)
Other Employees Section 5.7(a)(iii)
Pre-Committed Sale Section 1.4(b)(i)
Purchase Price Section 1.1
Stock Purchase Section 1.1
Quincy's Benefit Plans Section 2.15(a)
Quincy's Contracts Section 2.16
Quincy's ERISA Plan Section 2.15(a)
Quincy's Pension Plan Section 2.15(a)
Shares Preamble
Third Party Claim Section 7.2(a)
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(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
9.2 EXPENSES.
(a) Except as otherwise provided in this Section 9.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel.
(b) Notwithstanding the foregoing, BAC agrees that in the event the
Closing shall occur, BAC shall be liable and shall reimburse Sellers, on and as
of the Closing Date, for all costs and expenses incurred by them, directly or
through Quincy's, in obtaining title commitments and surveys in respect of the
Real Property and the Leased Real Property.
(c) Notwithstanding the foregoing, Sellers agree that in the event the
Closing shall not occur and this Agreement shall be terminated by Sellers
pursuant to Section 8.1(g) hereof, Sellers shall, subject to the provisions of
Section 8.1(g), be liable and shall reimburse BAC for all costs and expenses
incurred by BAC in connection with the proposed transaction, within five (5)
business days of BAC's providing to Sellers written notice documenting in
reasonable detail the expenses so incurred by BAC, including but not limited to
fees and expenses of financial or other consultants, investment bankers,
accountants and legal counsel, whether incurred before or after execution of
this Agreement; provided, however, that in no event shall the amount payable by
Sellers under this Section 9.2(c) exceed $750,000; and provided, further, that,
notwithstanding any provision of this Agreement to the contrary, such payment by
Sellers to BAC shall constitute liquidated damages and shall be BAC's exclusive
remedy in the event of such termination by Sellers.
9.3 BROKERS AND FINDERS. Except for Ernst & Young, LLP as to Spartan
and Advantica and except for The Robinson-Humphrey Company, LLC as to BAC, each
of the Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by any of the Parties, Sellers on the
one hand and BAC on the other hand agree to indemnify and hold the other
harmless of and from any Liability in respect of any such claim.
9.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement and the Confidentiality Agreement constitute the entire agreement
between the Parties with respect to the transactions contemplated hereunder and
supersede all prior arrangements or understandings with respect thereto, written
or oral (except, as to Section 5.3(b),
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for the Confidentiality Agreement). Nothing in this Agreement expressed or
implied, is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
9.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after stockholder approval of this
Agreement has been obtained.
9.6 WAIVERS.
(a) Prior to or on the Closing Date, BAC, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Spartan or Advantica, to waive or extend the time for the compliance or
fulfillment by Spartan or Advantica of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of BAC under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of BAC.
(b) Prior to or on the Closing Date, Advantica, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by BAC, to waive or extend the time for the compliance or fulfillment
by BAC of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Sellers under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Advantica.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
9.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
9.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at
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the addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
Spartan or
Advantica: Advantica Restaurant Group, Inc.
203 East Main Street
Spartanburg, South Carolina
Attention: Rhonda Parish, Executive Vice President, General
Counsel and Secretary
Telecopy Number: (864) 597-8327
Copy to Counsel: Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Attention: Gary C. Ivey, Esq.
Telecopy Number: (704) 334-4706
BAC: Buckley Acquisition Corporation
489 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Gregory M. Buckley
Telecopy Number: (404) 888-1896
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Alexander W. Patterson, Esq.
Telecopy Number: (404) 881-4777
9.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of North Carolina, without regard to any
applicable conflicts of Laws.
9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
9.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
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9.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
9.13 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable,
[signatures on the following page]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
BUCKLEY ACQUISITION CORPORATION
------------------------------------
By: Gregory M. Buckley
President
ADVANTICA RESTAURANT GROUP, INC.
------------------------------------
By:
Title
SPARTAN HOLDINGS, INC.
------------------------------------
By:
Title
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